Trump’s Tariffs Could Prove Disastrous For European Niche Models

U.S. President Donald Trump’s threat on Friday to slap a 20 per cent import tariff on vehicles built in the European Union could prove disastrous for many niche cars.

Talking to Reuters, a senior executive at an unnamed European car manufacturer said convertibles could be especially hit by such tariffs.

“The tariffs, if they materialize, would call into question the business case for many niche models we currently sell in the United States. Convertibles are a particular headache. With Brexit and U.S. tariffs, this market could shrink further,” they said.

According to analysts from Evercore ISI, costly tariffs would ruin the business case for cars like the Mercedes-Benz SL. What’s more, the convertible market in the United States is already suffering from dwindling sales. In 2012, convertible sales hit 177,000. By 2019, that figure is tipped to plummet to 113,000.

One way to help secure the future of premium niche models would be for car companies to forge alliances and share production costs, the aforementioned executive said.

Some industry experts say that many assembly plants in the United States, including those from BMW, Daimler and Volkswagen, lack the flexibility to adjust in response to possible tariffs like these.

Of course, it’s not just high-end vehicles which will be hit with tariffs – all foreign-made cars could be. Consequently, the UK-made Honda Civic could cost 25 per cent more than it does now if the Japanese marque decided to pass on the higher tariffs directly to customers in the form of high prices. A more likely scenario would be for automakers to shoulder roughly half of the tariffs costs, passing the rest to the customers.