US labor levy pushes car tariffs to 35%

European cars heading to America now face cumulative tariffs as high as 35%. Steel and aluminum: 60%. On June 2, the Trump administration proposed an extra 10% tariff on EU exports, stacked on top of levies already in force, accusing Europe of failing to combat forced labor in its supply chains (USTR, CNBC). The EU shipped €532 billion in goods to the US in 2024 (Bundesregierung). A large share of that trade is now exposed to the new charge.

The legal swap

These tariffs required a change of legal costume. In February, the Supreme Court ruled 6-3 in Learning Resources v. Trump that the president cannot use IEEPA (the International Emergency Economic Powers Act, a security-emergency law) to impose tariffs (Supreme Court). All IEEPA tariffs were terminated within days.

So the administration found a different statute. On March 12, the US Trade Representative opened Section 301 investigations against 60 countries, a trade law with explicit congressional backing. The accusation: these countries tolerate forced-labor goods in their supply chains. The EU gets 10%; countries without forced-labor legislation, like Japan and South Korea, face 12.5%.

Who opposes fighting exploitation? That is what makes the framing so effective. But Bernd Lange, chair of the European Parliament's trade committee, called the findings "utterly absurd" (NBC News), pointing out that the EU adopted its own forced-labor import ban in 2024 (Council of the EU). His assessment: "First the tariff measure is decided, then the suitable legal justification is found."

Washington has a real argument, though. The EU's Forced Labour Regulation doesn't apply until December 2027. And unlike the US approach, which presumes any product from China's Xinjiang region is tainted unless the importer proves otherwise, Europe puts the burden of proof on regulators, not companies. The European Commission called the tariffs "unjustified". Both sides share the same stated goal, but a three-year enforcement delay is hard to defend at the negotiating table.

Who pays the stacking bill

The forced-labor levy compounds on top of existing tariffs, and that cumulative weight is where the damage concentrates.

The Turnberry trade deal (the EU-US framework from August 2025) set most tariffs at 15%. Add 10%, and the baseline for most EU exports reaches 25%. For steel and aluminum, where Section 232 national-security tariffs already sit at 50%, the total hits 60%. For cars, which carry 25% under existing auto levies, the surcharge pushes rates toward 35%. Bernstein Research calculates that a 10-point increase alone would cut German automakers' operating profits by €2.6 billion this year.

Pharmaceuticals, the EU's biggest US export category at 22.5% of total goods trade, are explicitly exempted, along with energy and aircraft parts. That shields pharma-heavy Ireland for now but leaves Germany's auto and machinery sectors fully exposed.

The DIHK (Germany's chamber of commerce) reports that 59% of surveyed firms already face rising compliance costs from US tariffs, with 14% scaling back their US operations. Among companies staying in the US market, 68% pass the cost to American buyers through higher prices. European exporters absorb margin damage; American consumers absorb price increases. The split depends on bargaining power, but two-thirds of firms have already made their choice.

The tariffs aren't final. Public consultation runs until July 6. The pharma exemption is the single biggest variable: if it falls, EU exposure jumps by roughly a fifth. Section 301 rests on firmer congressional ground than IEEPA did. But applying blanket country-level tariffs to allies over enforcement timelines has never been tested in court. That is the question the next legal challenge will have to answer.