Trade uncertainty for automotive sector deepens following August 1 measures

By the start of 2025, it was clear that tariffs would form the backbone of Donald Trump’s second-term agenda. Within weeks of returning to office, the White House began rolling out a series of sweeping trade measures that would, by mid-year, touch nearly every major trading partner and disrupt global supply chains – particularly in the automotive sector.

On April 2, labelled “Liberation Day” by the administration, a 25% tariff on all vehicle imports took effect, alongside planned duties on components, metals and a broad range of industrial goods. These were followed by the formal introduction of “reciprocal” tariffs: a framework that imposed baseline duties of 10% on most imports, escalating to as much as 145% in some cases, depending on trade deficits and strategic calculations.

What we're seeing now is a turbulent series of negotiations, exemptions and retaliatory measures. Some countries, such as Japan and Vietnam, secured partial deals. Others, including China, Canada, India and Brazil, faced sharply higher rates. Automakers reported billions in tariff-related costs, paused shipments and warned of production slowdowns and job losses.

The administration maintained that the tariffs were necessary to rebalance trade and bring manufacturing back to the US. But the cumulative effect is a year shaped by uncertainty.

The timeline below charts the most significant tariff decisions of 2025 – month by month – as they reshaped the rules of global automotive commerce:

August 2025

US-EU trade deal suspended:

• The EU paused planned retaliatory tariffs on US exports (including automobiles), covering €93 billion ($101 billion) in goods. The suspension is expected to last six months, pending the outcome of ongoing trade talks.
  
• The pause is linked to the US-EU framework deal from late July, which aims to de-escalate trade tensions and foster cooperation. Under the deal, the US agreed to cap vehicle and parts tariffs at 15%, down from around 27.5%, while the EU committed to boosting investment in key US sectors such as clean energy, semiconductors and automotive manufacturing.

US goods imports see steep drop: 

• The US Commerce Department indicates the US trade deficit in goods fell roughly 16%, declining from $71.7 billion in May to $60.2 billion in June.
• A significant contributor to the decline was a drop in automotive imports, with vehicles, parts and engines falling by $1.3 billion.

OEM fallout continues: 

• Mazda projects a $319 million operating loss for fiscal year 2026 due to US tariffs – assumed at 15% on Japanese imports and 25% on vehicles exported from Mexico.
  

Deferred deadline:

• Initial 90-day pause on reciprocal tariffs expired on August 1 (from an earlier July 9 expiry). 
• New tariffs across many countries set to take effect August 7, following a July 31 executive order establishing country-specific 'reciprocal' rates  – including a 10% baseline tariff for most nations, higher rates of 15% for trade-deficit countries, and tariffs ranging from 25% to 41% for countries like India, Canada, Brazil, Switzerland and Iraq. The White House has stated these rates are "pretty much set," with limited room for negotiation, and special provisions include a 40% penalty on transshipped goods and exemptions for imports already on route, provided they arrive before October 5.

Progress on deal with South Korea:

• On July 31, Trump announced an agreement reducing auto tariffs on South Korean goods from the threatened 25% to 15%. The deal includes $350 billion investment in US projects such as shipbuilding, chips and batteries. 
• On August 1, the Asian nation's trade minister said there is no written agreement yet on a trade deal between South Korea and the US.

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July 2025

OEM fallout: 

• Stellantis reports €2.3 billion ($2.3 billion) in H1 tariff-related costs; industry-wide margin erosion includes VW Group and Porsche.
  
• GM announces its Q2 core profit fell 21%, with a $1.1 billion tariff impact, and warns of a full-year tariff cost of $4-5 billion.

OEM countermeasures to tariffs

Curious how OEMs are responding? Explore Automotive Logistics' OEM action timeline for key strategies and developments.

Trade talks accelerate: 

• The deadline for implementation of 'reciprocal' tariffs pushed from July 9 to August 1. 
• Final push for deals with Canada, Mexico, India, Brazil and others before August 1. 
• Deals are made with the likes of Japan and Vietnam. On July 22-23, the US and Japan finalised a bilateral trade agreement that reduces reciprocal tariffs on Japanese vehicles and auto parts from 27.5% (including a 2.5% baseline and an additional 25% auto-specific levy) to a flat 15%. Vietnam, meanwhile, agreed to a 20% tariff on its exports to the US, avoiding the 46% “reciprocal” duty threatened by president Trump on “Liberation Day.”
• US-EU deal ratified, reducing auto and part import duties to 15%. 
• Korea begins final negotiations, setting the stage for its August agreement. 

The US Senate passes the 'One Big Beautiful Bill':

• Ends EV tax credits early and cuts off remain IRA funding. 
• Has implications for battery and EV component projects that are still in development. 
• United Auto Workers (UAW) warn of 20,000 potential job losses from the EV slowdown and plant mothballing tied to IRA cancellation.

June 2025

Upcoming deadline for more tariffs:

• A key deadline of July 9 will see further tariffs potentially enacted, unless countries engage in talks with the US "in good faith". 
• Failure to do so may trigger additional reciprocal tariffs, especially on high-deficit trade partners. 

Steel and aluminium tariffs raised: 

• As of June 4, the US doubles steel and aluminium tariffs to 50% for all imports, aside from those from the UK, which remains at 25%.
• This impacts both finished auto parts and raw materials, increasing cost pressures on domestic OEMs and tier one-three suppliers. 
• Automotive sectors reliant on imported flat-rolled steel, castings or extrusions are particularly affected (such as: EV platforms, body-in-white structures, chassis, and control arms).
  

Rare earth and US-China trade framework: 

• China and the US make some progress, with Trump claiming a "done deal" on a trade framework which allegedly includes magnets and rare earth minerals supplied by China, but details are not yet confirmed. 
• 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.

California emissions rules: 

• The US administration blocks the state of California and EPA from enforcing stricter vehicle emissions standards.
• The Alliance for Automotive Innovation supports the move, citing regulatory clarity and uniformity.  
• Potentially affects EV adoption timelines and OEM product planning for low-emission zones.

May 2025

Ongoing trade negotiations:

• US focuses efforts on securing deals with 18 priority trading partners.
• Trump reaffirms that “good faith” negotiations are required to avoid punitive reciprocal tariffs.
• Countries with major deficits (such as Germany, Japan, India) still under pressure to respond.

Court ruling on reciprocal tariffs:

• The Court of International Trade rules that Trump exceeded his authority under IEEPA to impose "reciprocal" tariffs.
• Orders the administration to suspend them within 10 days.
• Raises legal doubts over ongoing negotiations and executive tariff enforcement power.

US-UK finalise trade deal: 

• The US and the UK reach a trade deal, including reducing US vehicle import tariffs for the UK from the additional 25% levy to a maximum of 10%, with a 100,000-vehicle annual cap. Tariffs on British steel and aluminium imports to the US – which had also been levied at 25% – have also been cut to 0%, according to the UK government.
  

Part tariff implementation:

• As of May 3, the US enforces the 25% tariff on all imported auto parts, originally announced on “Liberation Day”.
• Affects a wide range of components including engines, powertrains, electrical modules, HVAC units and safety systems.
• Critical for aftermarket, repair and global platform assembly models.

Stacking tariff reform: 

• Trump amends rules to prevent stacking of multiple tariffs, specifically addressing cases where steel and aluminium tariffs (at 50%) could have compounded vehicle or part tariffs. It is also clarified that only one applicable tariff per item will be applied where overlapping categories exist.

IEEPA tariffs rate clarification:

• New guidance confirms the maximum burden is reduced to 27.5%, comprising: 25% vehicle import tariff and 2.5% pre-existing non-USMCA duty. 
• Initial fears that IEEPA tariffs (for non-USMCA compliance) could stack up to 52.5% are dialled back.
• Still a major cost for OEMs with offshore production, especially luxury/import-heavy brands.

Tariff offset scheme:

• As of May 2, the White House offers tariff offsets to OEMs that assemble vehicles in the US using USMCA-compliant content: Up to 3.75% offset on tariffs for imported parts (retroactive to April 3), and drops to 2.5% in year two, phased out entirely after that.
• Scheme is designed to incentivise local sourcing and protect compliant OEMs from stacking costs. For example, if an OEM assembles vehicles in the US (with vehicles having 85% US content, or USMCA compliant content), they can apply to offset up to3.75% of the tariffs on parts for one year, retroactive to April 3. This offset rate would then drop to 2.5% in the second year, before being removed completely 25% tariff on all imported vehicles.

April 2025, 'Liberation Day'

EU rejects US deal:

• Trump rejects the EU's "zero-for-zero" tariff proposal. 
• The European Commission’s proposal to introduce trade countermeasures against the US steel and aluminium tariffs is approved by European Union member states, following a meeting with automotive industry representatives including BMW, VW Group and Stellantis.
  

Escalations with China: 

• Trump threatens 50% tariffs on China in response to Beijing’s threat of a 34% tariff on US imports to China. China’s government says it will “fight to the end” if trade war continues to escalate.
• Trump hikes tariffs on Chinese imports up to 104%, and China responds with tariffs on US imports of 84%.
• Individual reciprocal tariffs are paused by the US for 90 days. Base global tariffs of 10% are on, while Trump raises tariffs on Chinese imports to 145%. 25% tariffs on steel and aluminium imports, and 25% tariffs on vehicle imports are upheld, as are the planned 25% tariffs on vehicle parts, due to be applied next month.
  
• China halts critical rare earth mineral exports to US and globally, which are crucial to the automotive and semiconductor industries, amid ongoing trade war between China and the US.
  

Commodity surges:

• Steel and aluminium prices jump, with Midwest hot-rolled coil prices up 21% since the tariffs of 25% on the materials.
• Creates pricing volatility for suppliers and OEMs reliant on imported rolled steel or extrusions.

Market reaction: 

• Following the April 2 announcement, US OEM stocks decline sharply on the New York Stock Exchange, including Ford, GM, Stellantis, Tesla, Rivian, and Toyota North America.
• Investors cite cost uncertainty, global retaliation risk and supply chain fragility.
• OEMs began to take action to mitigate risk, with JLR pausing all vehicle exports to the US, Stellantis halting production in Canada and Mexico and laying off 900 people at five plants in the US, and VW Group suspending vehicle shipments from Mexico to US, with its Audi division suspending exports to the US from Europe and Mexico.

Country-specific "reciprocal" tariffs scheduled:

• Trump announces individualised reciprocal tariffs against countries with large US trade deficits, including Germany, China and Japan.
• Tariffs of 20–50% set to begin on April 9, but are paused for 90 days after a legal challenge and backlash from allies.

Global tariff baseline implemented:

• A 10% universal tariff on all imports to the US takes effect on April 5. 
• Exceptions include: vehicles, auto parts, and steel/aluminium already subject to separate tariffs are exempt from this new global tariff.
• This baseline measure adds pressure to countries without bilateral trade agreements.
  

"Liberation day" tariffs announced: 

• Dubbed “Liberation Day” by the administration, president Trump launches a 25% tariff on all vehicle imports to the US, effective immediately. A 25% tariff on imported vehicle parts is also confirmed for implementation on May 3.
• The list of parts that will be affected includes engines, powertrains and electrical components.
• Temporary exemption granted for USMCA-compliant vehicles, which only pay the tariff on non-compliant content (25%).

March 2025

US imposes major automotive tariffs:

• US tariffs enforces 25% tariffs on imports from Canada and Mexico, and 20% on imports from China (March 4).

Canada and China retaliate:

• Both China and Canada retaliate with tariffs on the US.
• Canada responds with retaliatory tariffs on US vehicles, parts, and agricultural goods.
• China introduces counter-tariffs targeting U.S. automotive, electronics, and industrial exports.

Temporary exemption for USMCA-compliant carmakers:

• Trump calls a one-month exemption for carmakers in compliance with the USMCA deal.
• Applies mostly to US and Japanese OEMs assembling in North America with 75%+ regional content.
• European brands like BMW and Audi are excluded due to low NAFTA/USMCA content in Mexican-built vehicles.

OEMs react:

• Carmakers begin rerouting vessels to avoid US ports or delay customs clearance until post-negotiation.
• Surging activity at non-US transshipment hubs (such as Freeport, Kingston, Panama) reported.
• Simultaneously, OEMs begin rapid reviews of their sourcing and production footprints.
  

BlackRock buys Panama Canal ports amid geopolitical tensions:

• Trump falsely claims China “controls” the Panama Canal, causing political friction.
  
• BlackRock acquires two key Panama ports from CK Hutchison Holdings (Hong Kong-based).

25% on all steel and aluminium imports:

• Global tariffs of 25% on all steel and aluminium imports to the US are imposed. 
• The EU retaliates with tariffs on €26 billion ($28 billion) of US goods, to come into play in April.

OEMs call for tariff-free North America: 

• BMW and Audi both call for tariff-free trade in North America, as neither OEM complies with USMCA rules on local content for production in Mexico.
• There is a surge of vessel movements as OEMs scramble to reroute ships bound for the US from Asia and Europe. Meanwhile, OEMs look to diversify manufacturing as quickly as possible.

"D-Day" dates confirmed for tariff escalation: 

• D-Day dates for tariff implementation are set, with 25% tariffs on imported vehicles to come into play April 2, and 25% tariffs on imported components on May 3.

February 2025

Toyota commits to local EV battery production:

• Toyota announces it will make its own batteries at its plant in North Carolina and will begin local supply in April, showing commitment to EV battery production in the US despite Trump’s announcement about pausing IRA funding.
• The plant is expected to supply both Toyota and Lexus EVs and may help Toyota mitigate future tariff exposure by localising key value chains.
  

Threatens Canada with 25% auto part and metal tariffs:

• Threats are made by Trump to impose tariffs of 25% on auto parts and metals imports from Canada.
• Canada response with concern, warning it will act to protect its industries. 
• While not implemented, the threat adds strain to US-Canada relations just weeks before actual tariffs hit in March.

China retaliates with WTO complaint and 10% tariff:

• China retaliates against Trump’s auto tariffs with 10% duty on US vehicles and file a complaint with the World Trade Organization (WTO).
• This retaliation sets the stage for further escalation in March and April.
  

Ford CEO issues tariff warning: 

• Ford’s CEO James Farley warns of serious financial impacts on the automotive sector if Trump’s threatened tariffs persist. 
• Highlights include: supply chain cost volatility, higher vehicle prices, delays to EV rollout and investment. 

US-Panama tensions over canal control: 

• While tensions between the US and Panama ramp up further over the canal, as the US secretary of state accuses the Panama Canal of being controlled by the Chinese Communist Party.
• The canal – critical for East Asia-to-US East Coast vehicle flows – is now caught in geopolitical crossfire, raising alarms in automotive logistics circles.
• Auto carriers and parts suppliers reliant on canal access face potential delays or cost surges.

Trump vows global reciprocal tariffs: 

• Rather than pull back on tariff threats, Trump aims to impose reciprocal tariffs around the world, triggering potential trade wars that could impact automotive logistics networks and dampen investment. He says he will reveal more about his promised tariffs of 25% on vehicles on April 2.

January 2025

EV incentives halted under IRA:

• Trump halts EV incentives with a pause on funding from the Inflation Reduction Act (IRA). 
• The pause is immediate, affect OEM eligibility for consumer EV tax credits and federal funding for battery production and charging infrastructure. 
• In the short-term, the move could help balance EV supply and demand, but is likely to reduce investment in EV manufacturing and logistics in the US.
•  Automakers like Ford, Hyundai, GM and Volkswagen, which had made strategic bets on IRA-backed funding, are now forced to reassess future expansion plans.
  

Trump vows to “retake” the Panama Canal:

• The president promises to “retake” the Panama Canal, claiming it is operated by China. If action is taken to take control of the waterway, the impact would be felt heavily by the automotive supply chain.

Trump sworn in for second term:

• Trump is sworn in as president on January 20, and reaffirms his plan to impose 25% tariffs on imports from Mexico and Canada from February 1.

December 2024

Mexico and Canada warn of trade retaliation:

• Mexico and Canada warn the US against a trade war, following Trump’s promise of 25% tariffs on imports to the US
• In response to President-elect Trump’s announcement of a proposed 25% tariff on all imports to the US – including those from key allies – Mexico’s Ministry of Economy voiced strong concern, calling it a direct threat to the North American automotive supply chain. Canada’s trade minister similarly warned that such a move could trigger a mutually damaging trade war.
• Both nations begin preparing diplomatic and economic countermeasures, including WTO consultations, auto industry stakeholder briefings and early coordination with OEMs and cross-border suppliers. 

Industry reaction begins quietly: 

• While public reaction from OEMs is muted in December (pending inauguration), lobbying ramps up behind the scenes. Industry groups like the Alliance for Automotive Innovation and Original Equipment Suppliers Association (OESA) begin preparing legal and policy response frameworks. 

November 2024

Trump wins US presidential election:

• Trump wins the US election, plunging the North American supply chain into further uncertainty and unpredictability, with questions arising about Canadian and Mexican imports and the USMCA, Chinese and European trade flows, and investment in EVs. Analysts warn of USMCA violation and the impact on the automotive supply chain.

Toyota announces major investment in Mexico:

• Meanwhile, Toyota announces plans for a $1.4 billion investment in Mexico to renovate its Beja California and Guanajuanto facilities.

July 2024

Global trade flows into the spotlight:

• Tesla pauses its plans to build a new gigafactory in Mexico until after the US election. The OEM had first announced plans for the gigafactory near Monterrey in Nuevo Leon in March 2023 and it was originally expected to be operating by the first quarter of 2025. In a financial update, the carmaker said uncertainty surrounding the tariffs would make it impractical to invest heavily in the plant, but Mexican government officials have stated that the OEM has received $135m in incentives to build the factory.

Take me back to the top

A visual summary of the tariff arc