Regional ‘reciprocal’ tariffs
Since they were first announced on ‘Liberation Day’ in April, US president Donald Trump’s so-called reciprocal tariffs have been paused and delayed multiple times. In May, Trump said he would negotiate the rates down with countries who were engaging in “good faith” talks. Then, they hit a stumbling block when a US federal court ruled that Trump did not have the authority to impose the reciprocal tariffs on individual countries, but just 24 hours later, the administration’s appeal allowed the tariffs to carry on. The reciprocal rates then went up and down as countries went to the negotiating table. These tariffs (separate from the section 232 tariffs) were due to be implemented from August 1, but experienced more delays.
Tariffs on Canada and Mexico have been complicated, to say the least. With the USMCA up for review next year, the expectation is that tariff-reducing concessions could be made during negotiations. However, at the beginning of August, the US raised tariffs on Canada to 35%, keeping tariffs of 25% on Mexico. For both countries, USMCA-qualifying automotive parts are exempt from tariffs temporarily, while vehicles that are USMCA-compliant are currently tariffed at 25%. Cars built in the US and Mexico can claim back the value of US-sourced parts, although there is still a lack of clarity around this.
US-China talks had tensions rising, with duties racketing up to three-figures, but the countries reached a truce by mid-May, with 30% tariffs on Chinese imports, and 10% on US imports. On August 11, the US and China extended their tariff truce until November 10, holding tariff caps at 30% on Chinese imports and 10% on US imports.
The European Union reached a framework for a deal with the US at the end of July, which reduces the cost of shipping vehicles and parts from the EU to the US from a rate of 27.5% to 15%. Currently, this 15% tariff is not yet in place, with EU documents suggesting it will apply retroactively from August. As it stands, automotive exports from the EU would be taxed higher than those from the UK, which has a 10% tariff after reaching a deal in June, but the UK’s automotive goods have a cap of 100,000 vehicles annually. In response to the deal, industry lobby group European Automobile Manufacturers Association (ACEA), which represents 16 OEMs including BMW, Daimler Truck, Ford of Europe and more, said many elements still need to be clarified. In early August, the EU halted retaliatory tariffs on the US for six months while the two countries attempted to finalise the deal. Also as part of this framework, the EU committed to drop its tariff on automotive imports from 10% to 0%. While this has not yet been finalised, it could be significant for large exporters from the US to EU, such as BMW and Mercedes-Benz. For logistics firms, the new US-EU framework removes cost pressures on transatlantic shipments but adds little clarity for long-term planning.
The US and South Korea agreed on tariffs of 15% for vehicle imports and automotive parts imports in late July, replacing the previously threatened 25% rate. This came into effect on August 1, but as of early September, the agreement remains provisional and has not been formally finalised. Once legally signed off, it will put South Korea on an even keel in terms of tariff rates with the likes of the EU and Japan. 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.
A US-Japan trade deal, reached in late July and implemented on September 5, retroactive to August 7, offers a reduction from the threatened tariff rate of 25% on goods (including autos and parts) imported to the US to 15%, providing Japan invests $550bn in the US. The US-Japan deal includes reducing vehicle imports and automotive parts imports from 27.5% to 15%. The agreement means that Japanese carmakers have the upper hand – at least in the immediate term – 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 are at least 25%. Toyota is among many Japanese carmakers that have facilities in Canada and Mexico like Honda, which also has facilities in both countries, and Nissan and Mazda which have facilities in Mexico. The American Automotive Policy Council (AAPC), which represents GM, Ford and Stellantis, reacted negatively to the deal, arguing that it will be bad for US industry and US automotive workers.
Deals with ASEAN countries were a mixed bag. By July, Vietnam reached an agreement with the US for a 20% tariff rate (including for automotives), rather than the 46% duty that was announced on ‘Liberation Day’. Vietnam’s automotive exports to the US, including vehicles and components, totalled $1.1bn in value in 2024, according to the International Trade Centre (ITC). An interesting aspect of the agreement is a 40% duty on transshipments from third countries, meaning that other countries in the ASEAN region or China and India 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. The US reached similar agreements with Indonesia and the Philippines (both 19% tariffs including automotive).
In August, the US doubled tariffs on India from 25% to 50%. While the rate doesn’t apply directly to finished vehicles or designated automotive parts, it does affect components widely used in the automotive supply chain including castings, forgings, tyres, wire harnesses and metal parts, of which India is a major exporter to the US. As a result, India said it plans to diversify its export markets, focusing on regions like the UK, Australia, UAE, South-East Asia and the EU.
But uncertainty crept in yet again. On August 29, the US Court of Appeals ruled that Trump’s reciprocal tariffs (not including section 232 tariffs) are unlawful, giving the administration until October 14 to appeal to the Supreme Court (which they did on September 4), and leaving the tariffs in place until then. What this means for countries that have made deals with the US is uncertain. If the reciprocal tariffs are scrapped, it’s likely that any agreements that have been codified will remain, which could actually hurt the countries that participated in negotiations more, while countries without deals stand to gain significant relief. Most deals are merely provisional frameworks at the moment.
Until October, companies in the supply chain will still need to pay additional duties on imports, meaning higher costs will likely be factored into pricing, contracts and logistics budgets. It could also mean volatile sourcing decisions, changing inventory strategies, complex tariff coding, competitive imbalance, cashflow pressure and delayed investment decisions.
Tariffs on steel, aluminium and graphite
While trade deals have been reached for some individual countries that reduce tariffs, the levies are still steep for the import of materials such as steel, aluminium, graphite and rare earth minerals.
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%.
In August, the US administration extended the scope of the 50% import tariffs for steel and aluminium goods, adding more than 400 additional items to the levy, including car parts such as chassis components, axles, steel wiring, brackets and mounts, and parts of heavy vehicles. These products, which are not listed under the car parts tariff of 25% to 27.5%, will be taxed at a higher rate of 50%.
Now, a 50% tariff rate applies to stamped components such as bodyshop panels, brackets and structural elements, even if they would otherwise qualify as car parts, meaning the rate goes up from 27.5% (25% for USMCA compliance) to 50%.
The new scope also targets product codes for derivatives and products made from the materials, including the likes of paints and sprays, which are often used in the automotive supply chain.
As well as this, truck trailers have been added to the list, further complicating automotive logistics. According to the US Department of Commerce, the non-steel and non-aluminium content of the goods will also be taxed according to the country of origin’s regional tariff rate.
OEMs will need to review codes carefully to determine which parts will be tariffed at which rate. Any delays on these goods or cost increases could directly impact the automotive supply chain, disrupting production and in the worst-case scenario, even shutting down lines or entire plants and delaying deliveries. Carmakers will likely have to rework sourcing strategies, while suppliers will find it increasingly difficult to remain competitive.
But the tariff rates could potentially be disputed. Canada is set to retaliate against these steel and aluminium tariffs with its own 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 the bloc put a pause on this in early August for six months while the two countries attempt to finalise a deal.
In July, the US Commerce Department imposed preliminary anti-dumping tariffs of 93.5% on Chinese graphite imports, with tariffs potentially going up to 700% for specific companies. Since August 11, the tariff on Chinese graphite imports was reduced to 30%, due to the tariff truce between the two countries which is in place until November 10.
Despite the reduction, the tariff on Chinese graphite is still substantial, as before this year there was no direct tariff assigned to the material. The 30% rate could encourage US production of the material which is particularly important 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.
However, graphite has not been produced domestically since the 1950s. Titan Mining is planning to open a graphite mining site in the town of Fowler, New York, although this will not be open and operational for at least a few years. China has previously put controls and restrictions on the export of high-quality graphite to the US, including in 2023, when China cited national security concerns over the export.
As for rare earth minerals, the US has set tariffs of 30% on imports from China under the US-China truce, coming down from an earlier threatened 55% duty.
China had implemented strict export controls on the minerals and magnets in retaliation but began easing restrictions and resumed shipments through June and July.
Despite the recovery, export licensing remains tightly controlled by China. Rare earth minerals from other countries are generally exempt if they are sourced under USMCA or bilateral deals.
OEMs and suppliers suffer financial hit from tariffs
Automakers and suppliers are feeling the financial pain of the US tariffs, with higher costs, fragmented supply networks and uncertainty posing significant risks for the automotive supply chain. While some are absorbing the blows and adjusting financial guidance, others are continuing to invest in future production and supply chain networks, hoping to increase flexibility and resilience.
OEMs have already been hit hard financially by the impact of the US tariffs on the automotive supply chain – even though the effects are likely to last for years to come.
JLR’s profits before tax almost halved in the second quarter of this year compared to the same time in 2024, down from £693m ($927m) to £351m, with an EBIT margin of 4%, due to the impact of the US tariffs. The OEM’s revenue decreased 9.2% to £6.6 billion in Q2, compared to Q1, which it also attributed to the 27.5% tariffs on exports to the US for cars and parts.
In its preliminary and unaudited financials for the first half of 2025, Stellantis reported a net loss of €2.3bn ($2.7bn), due in part to the early effects of US tariffs. Doug Ostermann, chief financial officer at Stellantis, said on an investor call that tariffs had a net impact of approximately €330m in the first half of the year. “That’s really consistent with the disclosed estimate I made of a €1.15bn tariff impact, as we’ll see more impact in the second half of the year,” he said.
Meanwhile, GM revealed that its Q2 2025 operating profit fell by US $1.1bn due to tariff exposure, contributing to a 35% decline in net income. The company cautioned total losses could reach US $4-5 billion for the full year from tariffs. Despite this, the OEM is planning to import LFP EV batteries (a low cost battery chemistry) from Chinese battery producer CATL, even though the US is implementing 30% tariffs on imports to the US from China. In a statement provided to Automotive Logistics, a GM spokesman said: “For several years, other US automakers have depended on foreign suppliers for LFP battery sourcing and licensing. To stay competitive, GM will temporarily source these packs from similar suppliers to power our most affordable EV model. We’re proud that we sell 12 EVs in the US using domestically produced battery cells, and in 2027 we will bring LFP production to the US, further cementing our unique and resilient US-based supply chain.”
VW Group reported a €1.3bn hit to operating profit in H1 2025. Audi and Porsche divisions were notably affected, with profit drops of about 64% and 91%, respectively. As a result, the two brands lowered their full-year margin forecast to 4-5% from 5.5-6.5%.
Toyota issued a profit warning in August, downgrading its full-year profit forecast as it said it was expecting a ¥1.4tn ($9.5bn) hit from the US tariffs. In its financial results, Toyota said: “Despite the challenging external environment, we have continued to make comprehensive investments as well as improvements such as increasing sales volume, cost reductions, and expanding value chain profits, thereby minimising negative impacts.” Despite the financial hit, and tariffs of 15% on imports from Japan, the OEM announced plans to acquire land to build a new vehicle manufacturing plant in Toyota City, Japan. The move aims to maintain production capacity of 3m vehicles in Japan, as well as create a “plant of the future”, the carmaker said.
Mazda cut its financial outlook, warning of a nearly $1bn hit from US tariffs, and forecast that its operating profit would drop by $320m.
Truck makers such as Daimler Truck, Traton and Volvo are leveraging production in Mexico to qualify under USMCA rules and avoid the highest duties, including the 50% tariffs on steel and aluminium derivatives and components.
Beyond this, we could see supplier consolidation, with tier-1 suppliers facing pressure if OEMs move to bring operations such as stamping in-house to reduce costs and risk. EU supply chains could see an influx of demand, as OEMs turn to industrial paints and coatings from Europe rather than Asia.
For heavy-vehicle parts such as axles, chassis and truck trailers, production could migrate towards Mexico to take advantage of lower-duty cross-border supply.
To read the full analysis as it was published on the Automotive Logistics website, click here.