Volkswagen to hike prices after Donald Trump's 25% auto tariffs come into effect

Volkswagen is planning to add the new import fees to the sticker prices of its vehicles shipped into the US.

Volkswagen AG is planning to add the new import fees to the sticker prices of its vehicles shipped into the US.

A Volkswagen logo is pictured at Volkswagen's headquarters in Wolfsburg, Germany. (Reuters)

This comes after US President Donald Trump announced 25% tariffs on automobile imports into the US, which Volkswagen's cars now come under, according to a Bloomberg report.

The German automaker has sent its US dealers a memo informing them of the fees. It has also temporarily halted rail shipments of vehicles from Mexico and is holding cars shipped from Europe at port, according to the report.

Volkswagen has a factory in Tennessee where it makes the electric ID.4 and larger Atlas SUVs. However, other models such as the ID. Buzz van and Golf are imported from Europe, while the Tiguan and Taos SUVs and Jetta are brought in from Mexico.

German carmakers are among the ones most impacted by Trump's auto tariffs. Trump’s tariffs are a “fundamental turning point in trade policy,” the report quoted Hildegard Müller, head of Germany’s auto lobby VDA as saying.

The move will only produce losers, including in the US, with consumers hit by “rising inflation and a reduced choice of products,” she added.

On top of this, German automotive companies' shares slumped on Thursday, with Volkswagen and Mercedes falling more than 3% during early intraday trading, according to the report which added that BMW was an exception, trading up as much as 1.6%, and reversing earlier declines.

This also comes at a time when consumers' preferences are more inclined towards profitable sport utility vehicles, which is lucrative for the likes of Mercedes-Benz Group AG and Porsche AG.

As a result, Mercedes is looking to withdrawing lower-margin imported models such as the GLA small SUV in the US, according to the report.