An estimated 90,000 German-brand luxury vehicles are currently stuck in limbo at US ports such as Los Angeles, New York, Savannah, and Houston, according to global economic and geopolitical research platform PPR Mundial.

This automobile glut represents over $4 billion in ‘idle’ capital and is the result of a 25% hike in US import tariffs which President Trump has threatened to increase to 50% next month if negotiations with the European Union fail to lead to a trade agreement, or perhaps even before then if the mood takes him.

For every day vehicles remain in port beyond 72 hours, companies pay port operators an $8 parking fee which means the cost of the stockpile’s inventory rises to $20 million by the end of the month. Nor is this the end of the expense. The daily financing interest rate imposed by banks on each vehicle also erodes profitability as the stockpile period extends. European automakers will either have to take the hit on this interest or be forced to sell at a loss if the Trump administration does not back down.

Lack of Auto Activity

While an average of 31,000 European-made cars passed through customs into the US each week in May 2024, the number had dropped to 20,000 by the end of May -a 33% drop in import flows.

PPR Mundial highlights that at the Port Newark Ro/Ro vehicle terminal in New Jersey, models of the BMW X5, which normally leave the dock in 36 hours, have been parked there for several weeks. Evidence of a lack of auto activity, crane drivers at the terminal have been transferred to the container yard to fill their working hours.

Meanwhile, Audi’s Q5 shipments from Mexico, transported by train, are just sitting in the free zone in Houston, with truck drivers waiting for delivery orders. As for Los Angeles, the storage area, reportedly already bursting at the seams due to Porsche front-loading shipments, has now reached capacity. The port authority has converted an empty plot of land south of the city into a temporary parking lot to accommodate the swelling stock.

At the port of Long Beach, the automobile terminal operated at 85% capacity before the tariff crisis, but this fell to 40% in May. The lower volume of vehicle shipments is weighing on the operating margins of trucking, rail operators and warehouse operators.

Falling Inventory, Rising Retail Prices

One vehicle valuation and automotive research company reports that as of the end of May, German mid-range inventory nationwide had shrunk by 28% while in contrast, South Korean brands in the same segment saw double-digit increases in stock.

As for the import tariffs filtering through to retail prices, the premium segment is showing inflationary signs. The Porsche Taycan Turbo S in California was listed at $210,000 a few weeks ago. But even though the showroom price for the same model has risen to $235,000 due to the perceived impact the waiting list remains full. However, for mid-range luxury models, mid-income customers may baulk at paying an extra $5,000.

Talking tough

Despite reassuring words from both Washington and Brussels that a trade deal can be reached, uncertainty abounds as to the outcome of the tariff negotiations.

Trump continues to talk tough, warning that he may soon hike automobile duties, arguing that this could trigger automakers into speeding up investments in the US, “I might go up with that tariff in the not-too-distant future,” he said at a White House event. “The higher you go, the more likely it is they build a plant here.”

However, commentators note that it is a political strategy which fails to recognize the significant economic knock-on effects it would provoke. Even if German automakers do not completely withdraw from the US market, a reduction in volume will translate into higher prices and fewer options for American consumers.

EU Counter-Tariff Package

The European Commission is not averse to stern talking either, threatening to put a counter-tariff package, worth hundreds of billions of dollars, on the table, affecting US exports to the EU, ranging from whiskey to agricultural products such as California almonds.

But at the same time, it appears to be adopting a far less confrontational stance in order to close a deal. German newspaper Handelsblatt reported that negotiators in Brussels could be ready to accept tariffs of 10% across all the European Union’s exports into the United States, but only under certain conditions and with the understanding that it would not be permanent. This in the hope of restraining the Trump administration from putting higher duties on vehicles, pharmaceuticals and electronics.

Handelsblatt also said the EU was, in return, ready to cut its tariffs on U-made vehicles, and to possibly change technical or legal obstacles to make it easier for US automakers to sell their vehicles on the European market.

Several Possible Scenarios

The truth is there is little in the way of visibility as to how negotiations will play out or of knowing what scale of tariff hike European automakers will end up being confronted with.

Several possible scenarios could lie ahead. The first sees Washington and Brussels sitting down at the negotiating table in July and agreeing that US import tariffs on European automobiles remain at 25%. This would see the brands with vehicles sitting in US ports ‘cutting their losses’ and distributing vehicles to dealerships in the US.

In the second scenario, the two parties refuse to back down and Europe’s retaliatory tariffs come into effect along with the U.S.’ increase in duties to 50%. The trans-Atlantic flow of vehicles slumps by as much as 40% and becomes permanent, with the automotive sector in Germany in particular, facing a significant decline as exports to its most lucrative market dry up.

A third scenario would see German brands being forced to set up additional assembly lines in the US, reducing the output of their European plants with the economic and employment consequences only too apparent.

One market analyst told AJOT: “I believe the current 25% is already fairly high and frankly I doubt if this would be made permanent in any deal. Even a flat tariff of 10% will likely slowly erode export volumes in the long run (and investment decisions in the U.S. will then follow). So, under every likely outcome European production sites are likely to be worse off than previously.”

‘EU Should Further Strengthen Internal Market’

However, speaking at the Association of European Vehicle Logistics (ECG)’s 2025 General Assembly and Spring Congress, Prof. Dr Alexander Sandkamp, Fellow, Kiel Institute for the World Economy, emphasized that the impact of U.S tariffs on production in Europe was not as significant as one might expect.

“Considering internal EU trade, the EU absorbs more than 60% of its exports. The US only accounts for around 8%”, he said.

“The EU should thus further strengthen its internal market by reducing internal trade barriers – specifically with respect to services, ensuring a consistently high quality of its transport infrastructure and monitoring new legislation such as the CSDDD (Corporate Sustainability Due Diligence Directive) with respect to its trade dampening potential. This helps reduce dependence on the US”, he added.