Porsche AG and Mercedes-Benz Group AG are expected to be the hardest hit by President Donald Trump’s new 25% tariff on imported cars, set to take effect on April 3, 2025.

The additional duties could cost the automakers around €3.4 billion ($3.7 billion), significantly impacting their projected 2026 earnings, according to Bloomberg.

To counter the impact, manufacturers may need to raise prices or increase U.S.-based production.

The tariffs pose a significant threat to the European auto industry, which relies heavily on exports to the profitable U.S. market.

German automakers are particularly vulnerable, as the U.S. is their largest export destination.

High-margin combustion-engine models, such as Porsche’s 911 sports car and Mercedes’ S-Class sedan, are especially at risk.

Trump’s latest move is “a fatal sign for free and rules-based trade,” according to Germany’s VDA car lobby, which has urged Brussels to negotiate a deal with Washington.

Porsche shares fell as much as 5% in Frankfurt, while Mercedes-Benz dropped 5.2% and BMW AG declined 4.9%. Volkswagen AG, which owns Audi and Lamborghini, was down 4.3%.

In London, Aston Martin Lagonda Global Holdings Plc saw the sharpest drop, plunging 8.9%.

German automakers operate U.S. factories to serve both local and export markets.

However, with the European Union considering retaliation, an escalating trade war could further burden an industry already struggling with rising costs and slowing demand.