Volkswagen is reportedly reconsidering plans for a major Audi manufacturing facility in the United States in light of the painful automotive tariffs introduced by President Donald Trump.
Volkswagen’s CEO told Handelsblatt that U.S. tariffs cost the company approximately $2.5 billion in the first nine months of 2025. These costs include not only duties on finished vehicles but also tariffs on components that cross borders multiple times within global supply chains, not to mention the indirect expenses of logistics. This signals a need for reductions, which will lead to higher prices for consumers.
Beyond just Volkswagen, German investment in the United States fell by roughly 45% in 2025 as tariffs took effect.
German firms have historically been among the largest foreign investors in U.S. manufacturing.
At the same time, German exports to the United States also declined.
This was informed as much by tariffs as by the depreciation of the dollar, which made European goods more expensive for American buyers.
Although the tariffs are theoretically intended to encourage foreign companies to manufacture locally, in practice they can have the opposite effect when they are high or unpredictable. Uncertainty around future trade rules can cause firms to scale back or even cancel investments altogether rather than commit billions of dollars to fixed assets.
Trade uncertainty intensified even more after President Trump threatened additional duties on European goods.at the World Economic Forum.
This has pushed investors towards gold, which reached above $5,000 per ounce for the first time.
This is concerning, signalling an incoming financial crisis.
From a European perspective, one might argue that reduced overseas investment could encourage companies like Volkswagen to refocus on production within Europe rather than relying heavily on exports. While this aligns with political goals around re-industrialization and strategic autonomy, it is economically complicated by Europe’s stricter regulations and, worse, higher energy costs.
In the short term, certain American manufacturers may benefit from reduced foreign competition and increased pricing power. But this doesn’t mean lower prices for consumers — on the contrary.
BMW’s decision to cancel certain U.S. activities in response to the tariffs reinforces the pattern. At the same time, Volkswagen has taken the decision to build a battery plant in Canada, which offers strong incentives for electric vehicle supply chains as well as access to critical minerals.
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