On Wednesday, US President Donald Trump warned that he would impose major tariffs on auto imports from the EU if a wider trade deal with the bloc isn’t renegotiated.
Tariffs could cost German car makers “billions of euros” a year, Volkswagen Group (VW) chief executive Herman Diess told the Financial Times on Thursday.
He agreed that in the “worst case scenario” the tariffs could cost VW as much €2.5 billion euros ($2.8 bln) each year.
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The statement comes amid reports that US President Donald Trump may act on a secret Commerce Department report on how car part imports could affect national security.
Informally referred to as the “232” report, the document, which is yet to be made public, could recommend tariffs as high as 25 per cent on auto parts and cars imported into the US.
Earlier, independent analytical company Evercore ISI claimed that “based on a 25 per cent import tariffs, Germany’s big three auto firms [VW, Mercedes-maker Daimler and BMW] would see an immediate 6.25 billion euros ($7 bln) hit to earnings before interest and tax each year.”
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The company predicted that the Volkswagen Group would lose around €2.5 billion ($2.8 bln), while Daimler and BMW would suffer a €2 billion ($2.7 bln) and €1.7 billion ($1.9 bln) loss, respectively.
During a press briefing with Austrian Chancellor Sebastian Kurz at the White House, Trump said that “if we don’t make the deal [with the EU] we’ll do the [auto] tariffs”, adding that the EU has been difficult to negotiate with.
A trade row between the US and the EU intensified after Trump announced 25 per cent tariffs on steel and 10 per cent tariffs on aluminium imports from the 28-nation bloc and a spate of other countries in March 2018.
Although Trump said in July he would refrain from slapping new tariffs on EU goods, he has repeatedly threatened to hit the bloc with 25 per cent tariffs on car exports.