Potential US tariff cuts reshape global vehicle trade talks with EU, UK, China and more

Since the ‘Liberation Day’ announcement, when Trump announced ‘reciprocal’ tariffs on individual countries that were meant to be applied on 9 April, Trump and his administration implemented a 90-day pause and have applied a standard rate of 10% to almost all countries importing goods to the US (aside from outliers including China, Canada and Mexico, which have constantly varied).

US threatens tariff hikes without ‘good faith’ talks

Now, Treasury Scott Bessent has said that if countries do not negotiate “in good faith”, the ‘reciprocal’ tariffs are back on the table. Assuming this means tariffs would kick in after the 90-day pause, this would mean individual ‘reciprocal’ rates could be in effect from 8 July.

Bessent said the US administration will be focused on its 18 most important trading relationships, including trading partners Canada, the UK, India and China. Other trade partners that could have tariffs rolled back have not yet been named. Bessent said that the administration would send letters to each nation to confirm what their tariff rates would be.

“President Trump has put them on notice that if you do not negotiate in good faith, you will ratchet back up to your 2 April level,” he told CNN.

US-China vehicle tariffs reduced after peak tensions

Tensions have been rising between the US and China over trade talks in recent months, with tariffs being slapped on imports on both sides. Following Trump’s first threats of automotive tariffs in February, China retaliated with a 10% duty on US vehicle imports and filed a complaint with the World Trade Organization (WTO).

Since then, it’s been a back and forth, with the US escalating tariffs on China to 34%, then 104%, with China responding by implementing an 84% tariff on US goods. At the height of the trade war, Trump raised tariffs on Chinese imports to 145%, while China halted critical rare earth mineral exports globally.

The two countries now seem to have reached a truce, as the US has now brought tariffs on China back down to 30%, and China’s tariff on US imports to 10%.

This is important to automotive supply chains, as the previously announced 130% tariffs would have affected upstream and aftermarket parts, tooling and equipment. While 30% is still a considerable duty, it will be a partial relief for supply networks.

The de-escalation could also enable some US manufacturing to export to China, especially OEMs that already have established trade flows to China from the US, including BMW, Merecedes-Benz and Ford.

As for effects on freight rates, we can expect these to jump as demand returns and traffic from Asia picks back up.

What remains an uncertainty is China’s critical rare earth materials, as China has not yet said it will be resuming these exports.

EU and US restart negotiations amid retaliatory threats

Following ‘Liberation Day’, the EU’s proposed ‘zero for zero’ tariff deal was shot down, causing the European Commission to vote through the introduction of trade countermeasures, specifically against the US’ tariffs on steel and aluminium. The EU had set out a potential €21bn response in retaliatory tariffs, but this hasn’t come into effect yet as other deals were proposed to the US.

While the US and the UK reached a trade deal to lower vehicle import tariffs to 10%, capped at 100,000 vehicles, it is unclear when the cuts to the tariffs will actually come into effect, and offers little relief to Europe as a whole.

Since then, the EU and the US have been at an impasse, but trade talks have now restarted. With so much uncertainty remaining, the European Commission has downgraded its estimates for the bloc’s growth this year in its annual Spring forecast, from 1.3% growth to 1.1%.

Valdis Dombrovskis, economy commissioner for the EU, said: “Higher US tariffs and trade uncertainty are weighing on EU exports.” He added that “risks to the outlook remain tilted to the downside”.

Canada suspends some countermeasures in ongoing talks

Canada has paused some of its counter tariffs against the US while the two North American countries aim to come to a deal.

Canada, like Mexico, has had a more complicated set of rules for tariffs applied on it, as many of the tariffs including those on automotives are linked to USMCA-compliance.

When he was sworn in in January, Trump made it a priority to reaffirm his plan to impose 25% tariffs on imports from Canada and Mexico. Canada retaliated, vowing to impose 25% tariffs against $107 billion worth of US goods.

While its finance minister Francois-Philippe Champagne refuted claims that Canada has quietly lifted all tariffs and said it has kept 25% tariffs on tens of billions of dollars on US goods, the country has not confirmed which tariffs are paused.

This week, US vice-president JD Vance met Canadian Prime Minister Mark Carney in an informal meeting to discuss trade, but no official agreement has been reached.

India and UK secure new trade deal with vehicle tariff cuts

Since the UK’s deal with the US, the UK has also been in talks with India, leading to a trade deal after three years of talks. While not many details have been confirmed, the UK government’s Department for Business and Trade said it would include lower tariffs on vehicles, including a drop from 100% to 10% on luxury vehicles exported to India (within a yet-to-be-determined quota).

As of yesterday (19 May), Trump has claimed that India offered the US a zero-tariff deal on a reciprocal basis, however this has not yet been confirmed by India.

In his ‘Liberation Day’ tariffs, Trump had announced a 26% ‘reciprocal’ tariff on India.

We will update this story as more information becomes available…