Special series: US tariffs
Recent tariff
agreements with South Korea, Japan, Vietnam, and the UK, as well as revised
rates for China, the EU, Mexico, and Canada, are altering vehicle flows,
reshoring strategies and supplier alignments.
South Korea: Extended stability, conditional incentives
The US and South Korea have agreed on tariffs of 15% for vehicle imports and automotive parts imports, replacing the previously threatened 25% rate. However, the US set tariffs of 50% on steel and aluminium imports, in line with the rest of the world, impacting parts supply and driving up costs.
While the deal is yet to be signed off and finalised, it will put South Korea on an even keel with the likes of the EU and Japan, both of which also have 15% tariffs.
South Korea also committed to a $350bn investment in the US, with a share of $200bn allocated for semiconductors and nuclear energy, and $150bn going towards shipbuilding in the US.
The automotive logistics industry is still facing uncertainty though as to when and how the tariff rates will be implemented. Logistics providers may see increased cross-Pacific flows
of compliant components, but face added complexity in verifying sourcing
traceability.
European Union: Mutual rollback with limited scope
The EU suspended retaliatory tariffs planned for the US while the bloc finalises a deal with the US, pausing duties on €93bn worth of US exports, including automotive.
The framework for the deal, which is due to be finalised by 9 August, would place a 15% tariff on exports to the US, including vehicles and automotive parts.
However, US tariffs on Chinese-made EVs and
battery components remain, meaning European manufacturers with Chinese supply
chain links still face routing challenges. For logistics firms, the new framework removes cost pressures on transatlantic shipments but adds little
clarity for long-term planning.
Japan: Upper hand for OEMs like Nissan, Toyota, Mazda
A new US-Japan trade deal offers a reduction from the threatened tariff rate of 25% on goods imported to the US to 15%, providing Japan invests $550 billion in the US. The US-Japan deal includes reducing vehicle imports and automotive parts imports from 27.5% (the current rate for non-USMCA compliant vehicles and parts imports) to 15%.
The trade agreement means that Japanese carmakers have the upper hand by moving cars from Japan directly to the US, rather than importing from nearshoring countries like Mexico or Canada where Japanese carmakers have significant production, and where tariffs on cars and parts are at least 25% if in compliance with USMCA content rules, potentially up to 35%.
The deal with Japan follows similar agreements with Indonesia (19% tariffs) and the Philippines (19% tariffs).
Mexico and Canada: USMCA scrutiny
The US raised tariffs on Canada to 35%, while higher tariffs on Mexico have been paused for another 90 days. However, under the provisions of the USMCA, Mexico and Canada
are likely to retain 25% tariffs (for USMCA compliance) on automotive parts and vehicle imports.
Vietnam: Future growth, present constraints
Vietnam's new trade framework with the US promises 20% tariffs on its imports to the US, rather than the previously threatened 46% rate.
While significantly lower than the threatened 46%, the rate is still double the current 10% global tariffs.
An interesting aspect of the agreement is a 40% duty on transshipments from third countries, meaning that other countries in the ASEAN region or nearby cannot first ship goods to Vietnam, and then ship from Vietnam to the US, to try to lower tariffs. If enforced correctly, this would reduce any potential nearshoring strategies around Vietnam, but it is likely to be difficult to enforce. Rules of origin will need to be closely documented and monitored, but these will first need to be agreed between the two countries.
China: Tightening the squeeze
Trump’s “done deal” with China on a trade framework for 55% tariffs on Chinese imports 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. 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.
The US also imposed preliminary anti-dumping tariffs of 93.5% on Chinese graphite imports, with tariffs potentially going up to 700% for specific companies, with the final duty rate to be determined at the end of this year. This could encourage US production of graphite, an important material in the manufacturing of EV batteries, as well as brake linings, lubricants, and powdered metals. In 2020, the US was 100% reliant on graphite imports from countries including China, Mexico, Canada and India, according to the US Geological Survey 2021, with China controlling about 90% of the market. With tariffs on exports from the other countries providing graphite to the US, there is a higher incentive for the country to produce it domestically and localise supply chains, although this will take a while, as graphite has not been produced domestically since the 1950s.
UK: Preferential access with a ceiling
The partial US-UK trade deal reduces tariffs on vehicle
imports to 10%, but caps UK-built vehicle exports to the US at 100,000 units
annually. The quota raises strategic concerns for British OEMs like JLR, Mini
and Nissan Sunderland, as volumes near the threshold. For logistics providers,
the cap introduces complexity in allocation and timing of transatlantic
shipments, especially during peak delivery cycles.
However, it is slightly more lenient than the 15% tariffs imposed on US imports from the European Union.
Look out for our upcoming interactive tariff map...
