BMW Calm About U.S./EU Auto Tariffs But Could Be Surprised

BMW expects U.S. tariff discussions won’t be too complicated and could cost it just over €1 billion in 2025 but President Trump has been particularly critical of Europe’s trade policies and this might extend the auto industry’s negotiations into a more costly hassle.

BMW CEO Oliver Zipse told Bloomberg Television the €1.1 billion ($1.2 billion) figure was conservative and included tariff negotiations with Mexico, Canada and Europe.

Zipse was talking after BMW announced net profit fell by more than 30% in 2024 to €7.68 billion ($8.39 billion) because of weak sales in China and Germany. The auto profit margin fell to 6.3%. BMW expects an auto margin of between 5 and 7% in 2025. That compares with the expected guidance of between 6 and 8%.

Nevertheless, analysts said BMW’s electric vehicle development put this so-called legacy manufacturer in the technology fast lane.

CFO Walter Merti said the €1.1 billion figure included the potential impact of Europe’s tariffs on BMW’s China-made EVs and new U.S. tariffs on steel and aluminum, and imports from China and Mexico, according to Automotive News Europe.

On the surface, the problem with auto tariffs between the U.S. and Europe seems easy to solve. The U.S. levies European sedans and SUVs with a 2.5% tariff while U.S. vehicles in Europe carry a 10% charge. If fairness is the criteria it shouldn’t take much time to make them equal.

Talks between the U.S., Canada and Mexico look like being settled amicably. But Trump has described the European Union’s trade policy as “an atrocity.” Trump also claimed the annual U.S. trade deficit with the EU was more than $300 billion.

According to former U.S. ambassador to the EU Gordon Sondland, Trump is determined to put right what the U.S. considers long-term unfairness by the EU which extends past just tariffs, to what the U.S. considers corrupt non-tariff barriers too.

“When EU citizens come to the U.S. on vacation or to live here temporarily, they don’t bring their own cars or their own food. They are perfectly safe eating our food and driving our cars and it’s high time the EU treated our products that way,” Sondland said in a recent interview with the BBC’s NewsNight program.

The U.S. is complicating the issue with complaints about VAT, the EU’s 20% sales tax. A White House official, Stephen Miller, said the VAT charge makes the EU’s tariff an effective 30%, and this will have to be lowered. This seems to confuse the issue because VAT is charged on all products on sale across Europe, whether imported or local.

Trump has said he will reveal his proposals for new tariffs on April 2.

Shareholders might have been disappointed with BMW’s profit margin in 2024 but investment bank UBS liked the fact it was leading the transition to electric vehicles with its Neue Klasse technology.

“Neue Klasse will quickly make its way into BMW’s entire lineup whilst peak investment lies already behind us,” UBS said in a report.

Investment researcher Bernstein also pointed to the advantages of Neue Klasse.

“BMW is a very compelling story of corporate transformation based on its Neue Klasse platform of technology clusters that we believe will drive significant shareholder value. BMW’s forthcoming iX3 SUV at the end of this year and i3 sports sedan coming in mid-2026 appear to us to be at the cutting edge of technology,” Bernstein said in a report.

“Neue Klasse technologies will also be embedded in a further 38 new or updated BEV and multi-energy platform-based vehicles launched by end 2027.”

“BMW is going all in on technologies that fundamentally change how it designs and manufactures vehicles and embraces the opportunity of software-defined vehicles. This provides significant scope for cost reduction. Neue Klasse is BMW’s biggest ever leap, and we believe that this represents the best opportunity for a “legacy” auto player to establish not just relevance but also leadership,” Bernstein said.

Even if a tariff deal between the U.S. and the EU is concluded, there could still be a complicating factor. The EU’s Carbon Border Adjustment Mechanism in 2026 will tax carbon-heavy imports and will be seen by President Trump as a way to force the U.S. to comply with the Paris Climate Change Treaty which he has rejected. That could spur a reaction by President Trump.