Mercedes-Benz has worked to strengthen its manufacturing footprint in the U.S. over the years, including producing some of its vehicles at a Tuscaloosa, Alabama, facility. The company has experienced explosive growth in the American market by continuously investing in its U.S. manufacturing efforts. However, despite this dedication, the company remains in a difficult position with the incoming tariffs, as many of its components are sourced outside the United States.
Roughly two-thirds of the vehicles Mercedes-Benz delivered to dealerships across the United States last year were imported. Although the popular GLE and GLS SUVs are built in America, they aren’t exempt from the auto tariffs as they rely on engines and transmissions from Europe.
In a recent CBT News exclusive interview, Senator Bernie Moreno clarified the details of the new automotive tariff policy set to take effect on April 3. Even if a vehicle is assembled in the United States, it will still be subject to a 25% tariff on critical components—such as transmissions, engines, and electronics—if they are sourced from outside North America.
The impact of the new tariffs will be significant, and brokerage Bernstein estimates that Mercedes could see a 14% operating profit decline, roughly $1.7 billion this year. In addition, if other countries enforce retaliatory tariffs against the United States, it could face additional financial pressure.
The industry is already experiencing the strain that retaliatory tariffs could cause. China has already responded with an additional 10% tariff on large U.S.-made vehicles in retaliation for the Trump administration’s recent 10% levy on all Chinese imports.
Beyond immediate financial concerns, the long-term impact of these tariffs could reshape Mercedes-Benz’s U.S. strategy. The company has relied on its Alabama plant as one of its key facilities, but with escalating trade tensions, its ability to maintain that role is now in question. If tariffs remain in place, Mercedes-Benz may have to reconsider how it localizes production or risk further financial strain.
The shift to electric vehicles adds another layer of complexity. Mercedes-Benz previously announced a $1 billion investment to prepare its Tuscaloosa plant for EV production. Still, with slower-than-expected EV sales, that investment’s return is uncertain. With new tariffs increasing costs across the board, the company is left to weigh how to balance production, pricing, and profitability.
Mercedes-Benz CEO Ola Källenius is advocating for a zero-tariff agreement between the U.S. and Europe in response to the growing trade tensions. At the moment, Mercedes-Benz is getting hit with tariffs from both countries. When shipping vehicles from Tuscaloosa to Europe, the automaker pays a 10% tax. When importing vehicles from Europe into the U.S., the company pays 2.5%. Increasing the import tax to 25% could drastically impact the profitability, which the automaker may try to pass on to consumers.
Unless a trade resolution is reached, the company will need to navigate an increasingly challenging regulatory environment that could force major changes to its long-standing global production strategy.
