The United States Plans To Impose Tariffs On Automobiles, Causing A Reshuffle in The Global Supply Chain

The United States plans to impose tariffs on automobiles, causing a reshuffle in the global supply chain

 

 

On February 14 local time, President Trump of the United States announced that he planned to impose tariffs on imported cars from April 2, in order to protect the local automobile industry in the United States. But this time, the specific tariff level was not disclosed, and it was not stated whether this policy applies to all imported cars.

 

Since taking office, Trump has announced that it will impose a 10% tariff on goods from China and a 25% tariff on non energy goods from Mexico and Canada, but these measures have been postponed for a month. In addition, starting from March 12th, the United States will impose a 25% tariff on all steel and aluminum products exported to the United States.

 

As the world's second-largest automotive market, imported cars from the United States account for approximately half of the market, with major sources including Mexico, Canada, Japan, and Germany. If the Trump government comprehensively imposes tariffs on imported automobiles, it will inevitably lead to a series of chain reactions.

 

According to some institutions' calculations, if tariffs are imposed on Canada and Mexico, the US automotive market will be more affected. Of the 16 million new cars sold in the United States in 2024, approximately 23.4% are expected to be produced in these two countries. Japan is another major automobile exporting country, exporting 1.48 million cars to the United States in 2023. It is particularly noteworthy that Chinese car companies may be completely blocked by building factories in Mexico to avoid US tariffs.

 

Many domestic car manufacturers in the United States have expressed concerns about the increase in additional costs and uncertainty. It is estimated that if these tariff policies are officially implemented, nearly a quarter of the 16 million cars sold in the United States each year will be directly affected, and the parts supply chain will also be impacted. Most of the additional costs may be passed on to consumers.

 

Most directly, car companies may reassess their global supply chain layout and consider whether they should move their production lines to the United States to avoid high tariffs. This may lead to an increase in production costs in the short term, and for local car companies like General Motors and Ford, their component supply chains are closely linked to Mexico and Canada. Once tariffs are implemented, the profitability of these car companies may be significantly impacted. For car companies, it can only be the lesser of the two conflicting interests.

 

 

Moreover, Trump's tariff policy is not only aimed at China, but also involves so-called allies such as the EU and Japan. For example, BMW and Mercedes Benz from Germany have a significant market share in the United States. Once tariffs are raised, it may trigger retaliatory tariffs from the European Union, exacerbating transatlantic trade frictions and causing mutual harm.

 

As is well known, China exports very few complete vehicles to the United States, so the direct impact of imposing tariffs on complete vehicles is actually limited. But the export of automotive parts from China to the United States is a big problem. In the first half of 2024, the export value of parts has reached $12.1 billion, accounting for 15% of the total. If the United States expands the scope of tariffs, many Chinese component suppliers will face downward pressure on orders. This may affect a complete supply chain.

 

In the face of these pressures, Chinese auto companies have also made predictions, because this is Trump's consistent style. Chinese car companies are accelerating their expansion into emerging markets such as Southeast Asia, Latin America, and the Middle East.

 

If these policies are really implemented in the United States, they will inevitably change the overall pattern of the automotive industry, especially in the global supply chain and market layout. In the short term, automobile manufacturers may face issues such as rising costs and supply chain disruptions; In the long run, the restructuring of the global market has also prompted all parties to accelerate the adjustment of their strategies.

To be honest, although these measures may seem to protect the domestic automotive industry in the United States, based on past experience, we are cautious about whether they can achieve the expected results.

 

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