Speaking to
the press aboard Air Force One after his meeting with Xi Jinping, Trump alluded
to a number of major developments in US-China trade relations that are likely to
significantly impact automotive supply chains: the suspension of China’s “roadblock”
on the supply of rare earth minerals; a delay on US Section 301 measures
impacting China’s maritime, logistics and shipbuilding sectors; a reduction in tariffs imposed by the
US on Chinese imports; and talks surrounding the supply of semiconductors.
Agreement on rare earth minerals
The first major announcement to come from Trump’s meeting
with the Chinese president was, according to Trump, China agreed to continue
the flow of rare earth, critical minerals and magnets to the rest of the world.
In April this year, at the height of tariff escalation between the two
countries, China
introduced export controls on seven rare earth elements, which became
subject to immediate licensing requirements.
These export controls raised concerns over bottlenecks for
EV manufacturers in the US, with rare earth metals like dysprosium and terbium
– two of the elements listed in China’s export controls – used in the
manufacturing of high-performance EV motors. The uncertainty the supply of
these metals and the speed of their shipments led to automotive manufacturers
like Mercedes-Benz reportedly working with suppliers of rare earths to build “buffers”
in case of potential shortages.
Then in October, five more elements were put under export
controls, used in automotive manufacturing for fibre optics and display panels.
But following his meeting with Xi Jinping, Trump claimed on
social media that “China has agreed to continue the flow of rare earth,
critical minerals, magnets, etc, openly and freely”. A spokesperson for China’s
Ministry of Commerce (MOFCOM) confirmed that “China will suspend the
implementation of relevant export control measures announced on October 9 for
one year and will study and refine specific plans”.
The MOFCOM spokesperson added that in response, the US will itself
suspend the implementation of a new rule announced on September 29 that expands
its "entity-list" export restrictions to any entity that is at least
50% owned by one or more entities on the list.
With this apparent deescalation of export controls,
particularly surrounding important materials for EV manufacturing, automakers
in the US may be more hopeful of certainty surrounding the flow of rare earths
from China going forward.
US maritime and logistics measures
Another matter that the two world leaders discussed was the
US’ implementation of measures under its Section 301 investigation targeting
China's maritime, logistics and shipbuilding industries.
This investigation, which concluded in April, determined
that China had been targeting these sectors for dominance and, a as
a result, the
US Trade Representative (USTR) laid out plans for introducing fees on
China-based vessel owners and operators, operators of Chinese-built ships and foreign-built
car carrier vessels in 2025. Then, in three years time, the US would introduce restrictions
on transporting liquefied natural gas (LNG) via foreign vessels.
According to the MOFCOM spokesperson, it was agreed during talks in Kuala
Lumpur, Malaysia – ahead of the leaders summit in Busan – that the implementation of these measures would be suspended for one
year, and in return China will “correspondingly suspend the implementation of
its countermeasures against the US side for one year once the US suspension
takes effect”. This news will likely come as a relief to Chinese exporters,
with the US having imported $3.82 billion worth of motor cars and vehicles from
China in 2024, according to data compiled by Trading Economics from the UN
Comtrade database.
Semiconductor talks
In addition to this, Trump confirmed that the US discussed semiconductor chips with China, claiming that representatives from China will be “talking to Nvidia and others about taking chips”. Trump described the US government’s role in talks surrounding the sale of Nvidia chips in China as that of an “arbitrator or referee”, explaining his view that “that’s really between [China] and Nvidia.”
Since October 2022, AI semiconductor chips have been subject to increasingly tight export controls by the US Department of Commerce’s Bureau of Industry and Security, requiring licenses to be exported to China.
"We’re always hoping to return to China, and I think that Nvidia in China is very good,” Nvidia’s CEO Jenson Huang said following Trump’s meeting with Xi Jinping. “It’s in the best interest of United States, it’s in the best interest of China, so I’m hopeful that both governments will arrive at a conclusion someday where Nvidia’s technology could be exported to China."
These AI semiconductors, although not directly installed in vehicles, play a crucial role in automotive development and supply chains. They can be used in data centres to train AI models for sensor fusion, object detection and path planning. They can also be used to create digital twins of supply chain operations and support AI-enhanced supply chain optimisation.
Tariff adjustments
Another major announcement surrounded the tariff that Trump
imposed on imports from China, Canada and Mexico on February 1, 2025 relating
to the US’ fentanyl crisis. This 10% tariff, according to a White House fact
sheet, was designed to hold these countries “accountable to their promises of
halting illegal immigration and stopping poisonous fentanyl and other drugs”
from flowing into the US.
What other tariffs might apply to automotive imports?
|
Tariff layer
|
Rate
|
Stacks?
|
Notes
|
| Base MFN duty | 2.5% | Yes | Standard customs duty for passenger vehicles (HTS 8703). |
| Section 232 (Autos) | 25% | Yes | National-security tariff authorised under Trade Expansion Act §232; applies to certain finished vehicles and parts. |
| "Reciprocal" tariff | 10% | Yes | Broad tariff applied to all imports, including from China; separate from Section 301 actions. |
| Section 301 (China-specific) | 25% | Yes | Tariffs imposed under USTR Section 301 investigation on Chinese goods, including autos and many parts. |
| Fentanyl-related EO 14195 tariff | 10% | Yes | Linked to fentanyl-related enforcement; applies broadly to Chinese imports (dropped 10% after Busan meeting). |
Currently, both the US and China have 10% “retaliatory” tariffs imposed on imports from the other country while a trade deal between the two countries is being negotiated. The US has also implemented a 25% Section 232 tariff on imports of auto parts and vehicles into the country.
In addition, the US introduced Section 301 tariff in 2018 on imports of certain automotive parts – including electronics, batteries and motors – from China, at rates ranging from 7% to 25%, depending on the product category.
There’s also a standard duty, known as the base most-favoured nation (MFN) tariff, that exists as a 2.5% tariff for passenger cars and most auto parts imported into the US, or a 25% tariff for light trucks and commercial vehicles.
This rate was then increased on March 3 to 20% for imports
from China, with Trump’s executive order cited China’s “failure… to act to
blunt the sustained influx of synthetic opioids, including fentanyl, flowing
from [China] to the United States”.
However, since meeting with Xi Jinping on October 30, Trump
claims to be satisfied with China’s progress on this matter and, as a result,
announced a return to the original 10% rate for imports from China.
“On fentanyl, we agreed that he was going to work very hard to
stop the flow… I put a 20% tariff on China because of the fentanyl coming in,
which is a big tariff, and based on the statements today, I reduced it by 10% –
so it’s 10% instead of 20%, effective immediately,” Trump said.
This fentanyl-related tariff applies to all imports from
China, and has been separate from “reciprocal” tariffs introduced as the
US-China trade war escalated earlier this year. What this means for automotive
supply chains is that US importers of parts and vehicles from, from today, will
be subject to a lower tariff rate, reducing costs.
A trade deal in sight?
Trump suggested that a comprehensive trade deal with China
could be coming “pretty soon”, which would certainly impact automotive supply
chains all around the world. “We have not too many major stumbling blocks,”
said Trump. “We have a deal [and] every year we’ll renegotiate the deal, but I
think the deal will go on for a long time.”
