Latest tariff and trade updates affecting automotive industry

US president Donald Trump has been changing the landscape for the automotive supply chain almost daily, with updates and revisions to tariffs and trade affecting the industry. Here’s the latest…

Steel and aluminium tariffs

As of 4 June, the US has doubled its tariffs on all steel and aluminium imports (except for those from the UK, which has a rate of 25%) from 25% to 50%.

Canada is set to retaliate to these steel and aluminium tariffs with its own retaliatory duties set to take effect in October.

The European Commission previously approved a proposal to introduce trade countermeasures against the US’ steel and aluminium tariffs, following a meeting with automotive industry representatives including BMW, VW Group and Stellantis, although it is not clear if these are still planned. According to the FT, the European Commission president’s chief of staff, Bjoern Seibert, told EU ambassadors last week that the bloc must make a “credible threat” of retaliation if it wants to get a good deal with the US.

For more on the latest UK-US trade updates, click here.

US-China trade

Following an almost-truce, both the US and China have backed down from tariffs that threatened to rise above 145%, but China’s halting of rare mineral exports globally were still a pressing issue.

Now, Trump’s “done deal” with China on a trade framework includes magnets and rare earth materials supplier by China, according to the US president. However, the details of this framework and what is included or excluded is yet to be revealed.

As it stands, the US will enforce 55% tariffs on China and 10% for the US. It is understood that the 55% tariffs on China consist of a 10% ‘reciprocal’ base tariff, 20% International Emergency Economic Powers Act or IEEPA tariff, and an existing 25% tariff on imports from China. China has also offered expedited export approvals for civilian uses of rare earth minerals.

While this will offer some form of relief, it still leaves risk in the automotive supply chain, as it is only assumed that minerals for automotive semiconductors will be allowed under this expedited export offer from China and could still change at a moment’s notice.

In the meantime, according to Freightos, the initial demand surge following the China-US de-escalation and ahead of the August 12th deadline for the reduced US tariffs on China may be in the rear view. However, carriers are still expecting a stronger and more prolonged transpacific container volume spike, have increased capacity on the lane by 13% compared to March and early April, according to the logistics marketplace firm.

California EV mandate repeal

Trump has announced that he is overturning California’s attempts to phase out ICE vehicles by 2035 and promote the uptake of EVs. The state of California had been granted an Environmental Protection Agency (EPA) waiver in December 2023 which allowed the state to enforce stricter vehicle emissions standards, but the US president has signed resolutions that overturn these plans under the Congressional Review Act.

The move effectively blocks California and the EPA from approving any similar actions in the future.

The rules would have required OEMs to ensure 35% of new vehicle sales by 2026 were zero-emissions, reaching 68% by 2030 and 100% by 2035.

When the UK made a similar move at the end of last year, fast-tracking a consultation on ending the sales of new ICE vehicles by 2030 through the Zero Emissions Vehicle (ZEV) mandate, the automotive industry in the UK reacted positively. 

Similarly, the US automotive industry seems broadly supportive of the move, with the likes of the Alliance for Automotive Innovation welcoming the decision.

John Bozzella, president and CEO of the Alliance for Automotive Innovation said: “Everyone agreed these EV sales mandates were never achievable and wildly unrealistic. Worse than unachievable, these EV mandates were going to be harmful. Harmful to auto affordability, to consumer choice, to industry competitiveness and to economic activity.

“Customers don’t want the government telling them what kind of car to buy. What they want is a range of choices like efficient gas-powered, battery electric, hybrid and plug-in vehicles. President Trump deserves credit for identifying this problem and doing something about it. He got behind this repeal before the EV mandates did real damage to the auto industry in America, stood up for customer choice and helped restore a degree of balance to US emissions regulations.”

However, the news won’t be received warmly all round, as many OEMs have already sunk time and money into adapting their production and supply chains in anticipation of stricter EV requirements. It again reinforces the uncertainty automakers are feeling, leaving investments in EV technology tentative.

Some OEMs may continue with their EV investments, as the requirements could come back stronger after Trump’s term is up.

Threats of further tariffs on the EU

July 9th is a key deadline for the EU, as Trump has threatened 50% tariffs on EU imports by then unless negotiations “in good faith” are happening by then.

Some of the key points for these negotiations include the EU’s value-added taxes (VAT) and regulations affecting US companies, although these will be difficult to move along, as EU officials have insisted they are non-negotiable.

Retaliatory tariffs imposed by the EU could also come into play in mid-to-late July, which could spark further escalation, if the US-China retaliatory tariffs are anything to go by.