Could German Carmakers Gain from US-SINO Tensions?

Trade tensions between the US and China are rising once again. President Trump has paused a range of global tariffs for 90 days but sharply increased duties on Chinese imports to 145%. 

In response, China raised its tariffs on US goods to 125%, up from 84%, as both sides hardened their positions. Beijing has urged Washington to remove what it calls unfair and targeted measures. (Source: Finance Yahoo)

Meanwhile, the European Union (EU) appears to have avoided immediate impact, giving EU industries some time to assess the fallout. If pressure between Washington and Beijing continues to build, it could reshape global trade flows—particularly in the auto sector, where access to China is critical.

China remained the world’s largest car market in 2023, with 25.8 million vehicles sold. Over 80% of those vehicles were manufactured domestically, with the remainder imported.

German automakers with significant exposure to the country—Mercedes-Benz [MBG.DE] , BMW [BMW.DE], Porsche [P911.DE] , and Audi —could see shifting dynamics if US carmakers face headwinds in China from the latest trade policies and impact on automotive stocks.

Mercedes-Benz: The Most China-Exposed German Automaker 

Mercedes-Benz sold more than 737,000 cars in China in 2023, approximately 36% of its production. Some of its cars are the most popular and important in the country, such as the GLE SUV and the S-Class sedans.

In the trade war situation, some of its models may be affected by US-China tariffs, and others may not. This is because some models, such as the Maybach, GLC, G-Class, and S-Class, are shipped from Europe, while others are manufactured in the US and sent to China.

In 1Q25, Mercedes-Benz reported a 7% drop in global sales, including a 10% decline in both China and Germany and a 7% decrease across Europe.

BMW Draws Nearly a 3rd of Global Sales from China

Nearly a third of BMW’s sales—just over 826,000 vehicles in 2023—were in China, with 13% of that volume coming from imports. Two joint ventures that produce vehicles within China support most of its local sales. 

However, BMW still imports models such as the 5 Series, i4, and 7 Series from Germany to meet the demand for higher-end offerings.

BMW also reported a fall in 1Q25, with a drop of 1.4% in the first three months of the year, led by a drop of 17% in China.

Volkswagen’s Premium Bands Feel the Strain

China remains one of Volkswagen’s [VOW.DE] most important markets, with 2.9 million vehicles sold there in 2024—nearly a third of its global total of 9 million units.

While many of these vehicles are built locally through joint ventures, a significant share of imports come from its premium Audi brands and Porsche, majority-owned by Volkswagen. Audi sees just over 8% of its China sales coming from imported models.

Porsche, which has no local production, imports 100% of its vehicles sold in China. The market accounted for 25% of the brand’s global sales last year.

Volkswagen’s sales in China fell 7.1% year-on-year in Q1 of 2025 as market uncertainty and shifting consumer demand weighed on performance.

Conclusion

Tariffs targeting US car imports could open more space for European brands in the world’s largest auto market, especially given the ongoing consumer appetite for premium foreign vehicles.

However, challenges remain. Domestic brands—particularly in the EV stocks segment—continue to grow rapidly, reshaping market dynamics. German names like Mercedes-Benz and Porsche may attract more interest as they are less directly impacted by the latest trade measures.

Still, as tensions escalate, any potential gains for Europe’s carmakers will be weighed against rising competition and growing uncertainty.

*Past performance does not reflect future results.