On April 2, 2025, U.S. President Donald Trump signed an executive order announcing a 25% tariff on all imported automobiles and key components. Below, the editor of China Exportsemi tries to sort out the specific situation for you.
Ⅰ The impact of tariffs on the supply chain
The U.S. auto market is highly dependent on imports, with about 16 million new cars purchased by Americans in 2024, of which about 50% (8 million) are imported. Even locally produced vehicles rely on overseas supplies for 60% of their spare parts. The 25% tariff covers the whole vehicle and core components (such as engines, gearboxes, semiconductors, etc.), which directly leads to a surge in production costs. For example, a $30,000-priced SUV costs $7,500 in tariffs, and the retail price could rise by $5,000 to $6,000 if logistics and cost sharing are added. For automakers that rely on cross-border supply chains, it is difficult to avoid tariffs by adjusting their production layout in the short term. Cox Automotive forecasts that if the tariffs go into effect immediately, U.S. factories will reduce production by about 20,000 vehicles per day and reduce production capacity by 30%. In the long run, automakers may move production to the United States, but it will cost billions of dollars and at least two years to build a new factory. In addition, the uncertainty of tariffs has made companies cautious about capital spending, further exacerbating supply chain disruptions.
Figure: U.S. tariffs disrupt the global auto market: 8 million imported cars are blocked, Hyundai is the worst, Tesla is the big winner?
Ⅱ The reshaping of the market competition pattern
Tariffs have significantly raised the price of imported cars and changed the competitive landscape of the market. The American Automobile Association (AAA) expects the average selling price of imported cars to rise by 8%, and the average selling price of domestically produced vehicles will also rise by about 3% due to the increase in the cost of parts. This is a positive for automakers with a high degree of localization (such as Tesla and General Motors), while it is a heavy blow to brands that rely heavily on imports (such as Hyundai and Toyota). Consumers may turn to lower-priced used cars or local brands, leading to a decline in imported car sales, with the National Automobile Dealers Association (NADA) predicting that overall sales could fall by 10%. Tariffs may also trigger an escalation of the trade war, the European Union, Japan, and South Korea have said they will take countermeasures, the fragmentation of global auto trade will intensify, and the supply chain and market structure will be reshaped.
Ⅲ Impact on different car companies
(1) Hyundai Motor Group: the biggest loser
Hyundai Motor Group is the biggest victim of the tariffs. In 2024, it will sell 1.77 million vehicles in the United States, of which 1 million will be exported from South Korea, accounting for 56%. The 25% tariff will push up the cost of about $5,000 to $7,500 per vehicle, forcing it to increase prices. Hyundai North America CEO Randy Parker has confirmed that wholesale prices will be adjusted, but the price increase could lead to a 15% decline in sales and a further decline in market share. Hyundai has just announced a $21 billion U.S. investment plan, including an expansion of its electric vehicle plant in Georgia to 500,000 units. However, it will take several years for the new capacity to be put into operation, and it will not be able to alleviate the pressure on South Korea's exports in the short term. The share price fell by 4.28% (Kia fell by 3.45%), and the market value wiped out by $16.5 billion, reflecting the market's pessimistic expectations for its prospects.
(2) Tesla: short-term benefits, long-term challenges
Tesla is produced locally in the United States, which is protected from the direct impact of tariffs. The price of competing imported products has increased its relative value for money, and the stock price has rebounded after the tariff news. However, in Q1 2025, only 337,000 vehicles will be delivered, a year-on-year decrease of 13%, which is affected by the "anti-Tesla".Affected by the wave, sales continued to be under pressure. Although Tesla does not have to pay tariffs on complete vehicles, it relies on overseas suppliers (chips, materials) for about 65% of its components, and if the tariffs on semiconductors are implemented, the cost per car could increase by $188 to $219. In addition, the decline in sales shows that its market competitiveness is dragged down by its brand image, which is contrary to the tariff dividend. In the short term, Tesla will benefit from rising costs for its competitors, but in the long term, it will need to address sales bottlenecks and supply chain risks.
(3) Japanese automakers: the pressure is dispersed but the impact is controllable
Japan will export 1.37 million vehicles to the U.S. in 2024, accounting for 28.3% of its vehicle exports, making it the largest single market. The tariffs will push up the cost of a car by about $5,000, with Toyota, Honda, Nissan, Mazda, and Subaru shares falling 4%, 3%, 3.5%, 5%, and 6%, respectively, and the Nikkei falling more than 1,500 points. However, due to the fragmentation of brands and local production (for example, Toyota's factory in the United States has a production capacity of more than 1 million vehicles), the impact of Japanese automakers is relatively controllable. The Japanese government has launched financing support and 1,000 consultation counters to ensure the stability of the supply chain. However, Prime Minister Shigeru Ishiba said frankly that Japan lacks the means to retaliate against the United States and can only respond passively in the short term. The decline in vehicle exports will also affect industries such as steel and logistics, putting pressure on 5.58 million employees. Japanese automakers can mitigate the impact by expanding production in the U.S. and optimizing supply chains, but margins will be squeezed. The position of the U.S. market as a source of high profits could be shaken.
(4) U.S. car companies: short-term small profits can be expected, and long-term vigilance is required
GM and Ford have a high proportion of production in the U.S., and their Mexican plants are protected by the USMCA, so the impact of tariffs is small. However, its supply chain relies on overseas components, and costs will rise slightly. U.S. automakers can benefit from localizing production, but if the trade war escalates, their European and Asian markets could be affected by retaliatory tariffs. In the short term, small profits can be expected, and in the long term, it is necessary to be vigilant against global market countermeasures.
(5) Chinese automakers: basically unaffected
China's exports to the U.S. in 2024 will be only 116,000 units, most of which are vehicles produced by GM, Ford, and Tesla in China, and the direct impact of tariffs on them will be limited. There is zero impact on China's own brands, and China has expressed its opposition to the "weaponization" of trade, and may impose retaliatory tariffs on US exports. However, given that the focus of auto exports is Europe and Southeast Asia, the failure of the US market has little impact on its overall strategy. The U.S. tariffs are a "cross-strait fire" for Chinese automakers, and there is no significant loss in the short term.
Ⅳ The chain reaction to consumers and the economy
For U.S. consumers, tariffs mean higher car costs. A $30,000 imported car with a rise of more than 15 percent poses a significant burden on middle-class households, and the auto industry could be a trigger for inflation because cars are an indispensable product in the United States. Tariff-induced inflationary pressures could also ripple into upstream industries such as steel and rubber, pushing up overall commodity prices. Globally, the knock-on effect of tariffs cannot be ignored. South Korea's GDP growth is likely to fall by 0.1% due to the blockage of auto exports, putting millions of automobile-related workers in Japan under pressure.
Ⅴ Future prospects
The implementation of the 25% tariff policy in the United States allows us to see the changes in the whole world, which is an earthquake in the global automotive industry, with the epicenter directly pointing to Hyundai Motor Group. This kind of behavior is "harmful to others and self" for the entire automotive industry, but it is really something that we need to think about how to deal with it. OEMs and governments of various countries should strengthen cooperation to jointly address the challenges brought about by tariff policies and promote the sustainable development of the global automotive industry. At the same time, car companies should also accelerate technological innovation, transformation and upgrading, and improve their competitiveness to adapt to the changing market environment.
