VDMA warns that tariffs could financially strain German car manufacturers from a trade deal
by VT Markets
/
Jul 28, 2025
Germany’s VDMA is worried about the US-EU trade deal, saying it might cost German carmakers a lot each year. They highlight that Trump’s tariffs already hurt companies like Volkswagen.
Volkswagen had weak earnings in Q2, in part because of these tariffs. While the new tariffs might not be as harsh, they’re still set to impact the future of Germany’s car industry.
Concerned Outlook for the German Automotive Sector
The warning from the industrial group supports our cautious view on the German automotive sector. We think traders should consider buying put options on major players like Volkswagen, BMW, and Mercedes-Benz. This strategy allows for managed risk while trying to profit from the expected downturn as trade challenges persist.
This negative sentiment isn’t just isolated; it could hit the broader German market. The latest Ifo Institute survey shows the business climate index for the automotive sector dropped to -15.2, indicating serious worries about the future. Therefore, we’re also considering shorting DAX futures as a way to protect against a market downturn affecting the most important industry.
Opportunity with Rising Volatility
In addition to directional bets, this situation calls for action on rising volatility. Germany’s volatility index, the VDAX-NEW, has been stuck at a low 16, which we believe underestimates the risk of sudden US policy changes. We see this as an opportunity to buy long-term straddles on automakers, which can benefit from significant price changes in either direction.
We’ve seen this happen before during the 2018-2019 trade disputes, which caused German auto stocks to plummet due to tariff threats. The US is still a vital market, importing over €30 billion of German cars each year, according to the latest Destatis figures. This history along with current data suggests that taking protective measures is the smartest move in the upcoming weeks.
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by VT Markets
Jul 28, 2025
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