Despite the 90-day suspension for negotiations, analytics company GlobalData says the 25% tariff imposed by the US government on all foreign cars and automotive parts entering the country will have far-reaching implications for OEMs.
According to the Japan Automobile Manufacturers Association (JAMA), more than 30% of Japanese car exports were directed to the US in 2023, solidifying its status as the largest single-country export market.
“Projections from Japan’s Ministry of Finance indicate that automotive sales accounted for approximately 30% of Japan’s total exports to the US, valued at around ¥6 trillion ($40 billion) in 2024. The looming tariffs have compelled the Japanese government to act swiftly to negotiate favourable terms with US officials,” GlobalData analyst Madhuchhanda Palit says.
He says that South Korea, similarly, is reliant on the automotive market, has introduced emergency measures to counteract the anticipated financial burden from US tariffs.
The South Korean trade ministry has launched a multi-billion-dollar support package that includes increased financial backing, tax incentives, and subsidies for local automakers, with plans to elevate policy financing support to local manufacturers to 15 trillion won (approximately $10.09 billion) by 2025.
Palit says that India, as a significant supplier of automotive components to the US, is poised to feel the effects of the new tariff regulations. The 90-day halt for negotiations serves as a crucial timeline for APAC countries to navigate the evolving trade landscape.
The US tariffs are projected to impact the EU automotive industry exports, with German manufacturers bearing the brunt of the consequences.
Palit says Mercedes-Benz, BMW, and Volkswagen Group now face challenging decisions regarding whether to pause shipments or absorb the added costs of tariffs.
He says Mercedes-Benz produces 41.6% of its total US volume domestically, while 58.4% is imported, and Audi’s production is even more heavily reliant on imports, with only 28.9% of its US volume produced stateside.
“The situation poses a significant challenge for European manufacturers, as increased tariffs could lead to higher vehicle prices in the US market, potentially driving customers toward competitors,” Palit says.
“Moreover, the dilemma these manufacturers face—whether to absorb costs or raise prices—could have lasting implications for brand loyalty and market share. The German automotive industry, which makes up nearly 65% of the EU’s automotive exports, is acutely aware of the risks.”
In response, the EU has imposed a 25% tariff on a range of US goods valued at €22 billion, targeting products in retaliation for US tariffs on EU steel and aluminium.
However, following the US president’s announcement of a 90-day suspension of tariff increases, the EU has similarly paused its retaliatory tariffs pending the outcome of ongoing trade discussions.
“This tit-for-tat approach underscores the fragility of international trade relationships and suggests that a prolonged trade war could result in a detrimental cycle of tariffs that would harm both economies,” Palit says
“The temporary suspension of retaliatory tariffs offers a glimmer of hope for de-escalation, but the uncertainty surrounding the negotiations means that businesses must remain agile and adaptable in their strategies. Should a resolution be reached, it could foster a more stable environment for investment and growth in the automotive sector.
“The US president’s decision to suspend tariff increases for 90 days while negotiations unfold presents a critical opportunity for all stakeholders involved. Larger manufacturers may adapt through strategic pricing and production shifts, but smaller suppliers may face a more precarious future amid these changes,” he says.
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