Ever since news of President Trump’s tariffs were announced on April 2, a day Trump called “Liberation Day,” industries across the world have been contemplating a terrifying new reality.
From food to technology to automobiles, a major percentage of all the things we require to conduct our daily lives in the United States rely heavily on trade with other countries, especially China.
💰💸 Don’t miss the move: SIGN UP for TheStreet’s FREE Daily newsletter 💰💸
Enter Trump’s stance on China, which is currently a 145% tariff on imports from the country. China retaliated to this news by raising tariffs on U.S. goods to 125%.
After great alarm arose in the media, Trump seemed to soften on some of his previous stances, saying that “China tariffs will come down substantially” and adding that he was in active negotiation talks with China.
China has denied that claim, with Ministry of Commerce Spokesperson He Yadong saying, “At present there are absolutely no negotiations on the economy and trade between China and the U.S.”
Related: Japanese carmaker takes drastic action amid U.S. trade war
In short, that could mean the incredibly high tariff is staying in place (at least for now), which will devastate many industries that rely heavily on its imports.
One key industry in that position is automotive. While each major company varies, some automakers are especially vulnerable to tariffs due to their reliance on Chinese parts used in their manufacturing process.
Now, the German automotive sector is taking another blow, as a key part of the manufacturing chain has filed for bankruptcy.
A Volkswagen ID.7 is one of many models that will be affected.
Image source: Frankenberg/picture alliance via Getty Images
Volkswagen’s newest problem
Volkswagen has long relied on German supplier Bohai Trimet for gearboxes and body parts to create its vehicles. The company operates two plants.Â
Bohai Trimet has now filed for bankruptcy at its plant in Harzgerode, Saxony-Anhalt after 40 years of operation, MSN reported. Factory management initiated insolvency proceedings on April 22, putting a total of 580 jobs in jeopardy.
Related: Volkswagen teases new products aimed straight at curious buyers
The company currently has a few options. German law dictates that Bohai Trimet now has three months to restructure or find a buyer. If it cannot successfully do either, it will face permanent closure.
Insolvency administrator Olaf Spiekermann has been appointed to oversee the process. The factory will continue to operate for the next three months.
Several automotive suppliers based in Saxony-Anhalt have been forced to file for bankruptcy in the past six months, including Boruszew Kunststofftechnik and Schlote.
TheStreet has reached out to Volkswagen for comment.
Volkswagen is navigating rough waters
In the last six months, Volkswagen has had to make several difficult changes. The 88-year-old company announced an extensive restructuring plan in late 2023, which includes cutting 35,000 jobs across its facilities by 2030.
These changes come after a 15% revenue drop reported in 2024 as compared to the previous year. Volkswagen Group CFO and COO Arno Antlitz attributed the drop to “a challenging market environment.”
“We’ve not forgotten how to build great cars, but the costs, specifically in our German operations and factories, are far from being competitive,” Antlitz said during the company’s 2024 Q3 earnings call. “This is where things cannot continue as they are now.”
Volkswagen also recently announced a massive recall for its Audi brand that encompassed 44,000 vehicles. The recall was issued due to a software issue that could cause the instrument panel display to fail and the speedometer to stop working.
Related: Beloved car company announces recall of 44,000 vehicles
