Jaguar Land Rover has suspended shipments and the South Korean government has introduced emergency policies. There is no winner under the overall tariff

Text丨《Finance" reporter Li Xiyin intern Liu Ying

Editor丨Wang Jingyi

The 25% tariff is hitting all imported cars and key components in the United States, disrupting the global automotive industry.

The tariff stick not only hits car companies that export cars to the United States, but also hits traditional automobile powerhouses like Japan and South Korea that focus on automobile exports as the focus of the industrial economy.

On April 9, South Korea announced emergency support measures for the domestic automobile industry, trying to mitigate the "significant" damage caused to the industry by US President Trump's tariff policy, and the amount of policy financing support increased from the previous planned 13 trillion won to 15 trillion won (about 76.3 billion yuan).

Fitch Ratings previously published an analysis article believes that Japanese, Korean and German automakers such as Volkswagen and Hyundai will suffer a major impact in this round of tariffs, while the previous US tariff policies on Mexico and Canada will have a significant negative impact on Stralantis, Nissan, Honda and General Motors.

Tesla is expected to be one of the carmakers least affected by tariffs, because its cars are made in the United States and most of the parts are also from the United States. Even so, Tesla CEO Musk said that the impact of tariffs on Tesla is "huge".

Automakers around the world are storing thousands of cars in U.S. ports and temporarily halted shipments to minimize the impact of Trump's escalating trade war.

But whether it is the rising tariffs or the adjustments made by companies to deal with risks, consumers will probably eventually pay for the costs.

Price increase, shutdown, capacity transfer

On April 6, the UK's Jaguar Land Rover announced a suspension of shipment of cars to the United States for one month to formulate longer-term responses to Trump's automobile import tariffs.

On April 8, Stellantis had stopped having its Chinese partner Leapmotor (0 9863.HK) T03 small electric vehicle launched in Poland and is considering alternative production options.

Volkswagen Group plans to charge import fees for vehicles assembled outside the United States, while Audi plans to suspend delivery of vehicles assembled in Mexico and overseas and shipped to US ports after April 2.

Some car companies have strong brand power. The day after the tariffs came into effect, Ferrari announced that some models would increase their price by 10%.

Mercedes-Benz hopes to adjust the combination of models sold in the United States, consider withdrawing entry-level models from the US market, and focusing on more profitable models to absorb the impact of tariffs.

Toyota and Honda are still waiting and watching, saying that they will keep the price unchanged for the time being.

Ford launched the "American Sharing" promotion plan to cut prices and grab the market. The Raptor F-150 has been reduced by 8%, and the Mustang Mach-E electric vehicle subsidy has been reduced to $42,000 after subsidy, which is $3,000 cheaper than the Tesla Model Y.

Cars.com, the leading website and trading platform of the United States' automobile portal, ranks the most "American" cars by five standards: assembly location, component content, engine origin, transmission origin and US manufacturing labor. The study analyzed more than 400 2024 models to determine the qualifications of the models listed.

Tesla has topped the list in recent years, which means Tesla is expected to be one of the car manufacturers least affected by tariffs because its cars are made in the United States and most of the parts are also from the United States.

Top 10 Most "Americanized" models in 2024

Ranking

Car model

Assembly location

1

Tesla Model Y

Fremont, California; Austin, Texas

2

Honda Passport

Lincoln, Alabama

3

Volkswagen ID.4

Chattanooga, Tennessee

4

Tesla Model S

Fremont, CA

5

Honda Odyssey

Lincoln, Alabama

6

Honda Ridgeline

Lincoln, Alabama

7

Toyota Camry

Giog City, Kentucky

8

Jeep Gladiator

Toledo, Ohio

9

Tesla Model X

Fremont, CA

10

Lexus TX

Princeton, Indiana

Data source: Cars.com (American-Made Index)

Even so, Tesla CEO and Trump's political ally Musk also made implicit criticism of the US tariff policy. On April 7, Musk released a famous video by economist Milton Friedman, in which he tactfully opposed widespread high trade barriers by explaining how pencil parts require complex supply chains.

The crisis quickly spread to the jobs of workers in the automobile manufacturing industry. In response to Trump's 25% tariff on imported foreign cars, Stellantis will temporarily close production in Canada and Mexico, opening 900 workers at five U.S. factories that produce spare parts. Meanwhile, Stellantis's previous $5 billion investment commitment to Trump may also be affected by tariffs.

Some media analyzed that tariffs may have a serious impact on the Mexican economy, with one million people directly employed in the automotive industry, which accounts for about 4% of Mexico's GDP.

Trump has said that car tariffs will be permanent and that if cars are made in the United States, there is no need to pay tariffs. Up to now, many global auto companies such as Hyundai and Nissan have expressed their ideas of expanding production and building factories in the United States.

Trump regards Hyundai's investment in the United States as a typical case where the tariff policy "works": Before the announcement of the tariff policy, the world's third largest automobile group announced that it will invest $21 billion in the United States in the next five years, including building new steel plants, expanding electric vehicle production bases, strengthening technology research and development, reducing tariff shocks through localized production, and cater to the US government's demand for the return of manufacturing.

Japan, South Korea and Germany are injured

Tariffs also erode markets other than the United States. Porsche saw a decline in sales in the first quarter in all regions except the United States, and the sports car maker is struggling to cope with rising trade barriers that could lead to a drop in its most important market profits.

"As the German economy has already stalled, U.S. tariffs could push Germany's economic growth rate below zero, and some key industries such as automobiles and mechanical engineering will be hit particularly hard," said Clemens Fuest, director of the Ifo Economic Research Institute in Germany.

According to data from the European Automobile Manufacturers Association, the United States is the largest export market for the EU. In 2024, European automakers exported cars worth 38.4 billion euros to the United States, among which Volkswagen, Mercedes-Benz and BMW, the three largest automakers in Germany, accounted for about 73% of EU car exports to the United States.

German auto economy expert Ferdinand Dudenhof pointed out that German automakers will have to lower their selling prices in the United States to remain competitive, but this will lead to huge profit losses. In addition, since the price cut of 25% is not realistic, the number of cars these companies sell in the United States will also be significantly reduced.

Based on this, on April 3, von der Leyen vowed that the EU would support target industries such as automobiles and steel and protect its market from dumped goods forced to exit the U.S. market. “We will also closely monitor the possible indirect effects of these tariffs as we cannot absorb global excess capacity and will not accept dumping on our market.”

The European Commission said it will retaliate against U.S. exports up to 26 million euros against Trump's steel tariffs. Ireland, France and Italy have requested that bourbon be removed from the target product list.

In addition, member states such as France and Germany urged the European Commission to crack down on U.S. service exports, including the technology sector, and put pressure on Italian Prime Minister Giorgia Meloni, who is accused of opposing the EU's escalation of confrontation measures.

Meanwhile, the UK government is relaxing its electric vehicle targets and reducing punitive fines to support the domestic automotive industry. On April 6, 2025, Sir Keir Starmer announced that the deadline for the phase-out of new petrol and diesel vehicles will remain the same by 2030, but under the new plan, manufacturers will be allowed to sell fully hybrid and plug-in hybrid vehicles until 2035.

On April 9, South Korea announced emergency support measures for the domestic auto industry, trying to mitigate the blow to the industry by US President Trump's tariff policy. The South Korean government said the tariffs are expected to cause "significant" damage to South Korean auto and auto parts manufacturers.

Japan and South Korea are also important sources of automobile imports in the United States, with the import volume of complete vehicles being US$39.73 billion and US$36.64 billion respectively in 2024. For example, about 23% of Toyota's US sales come from domestic production in Japan, and about 60% of Hyundai (including Kia)'s US sales come from South Korea, both facing the impact of tariffs. Volkswagen Group's high-profit luxury models (including Porsche) will be hit, potentially undermining free cash flow.

To prevent liquidity issues, the South Korean government will increase the amount of policy financing support for automakers in 2025 from the previously planned 13 trillion won to 15 trillion won (about 76.3 billion yuan).

Automotive Services provider Cox Automotive previously predicted that tariffs would increase the cost of U.S.-made cars and $6,000 for Canadian or Mexico-made cars.

Automakers now have to decide whether to localize production in the United States to avoid tariffs, swallow costs, or pass it on to consumers. In the short term, automakers are expected to adopt tactical adjustments - reallocating production capacity at factories in the United States, working overtime to produce, and avoiding large-scale capital expenditures. In addition, it is expected that vehicle manufacturers may have to bear the tariff costs of some suppliers, similar to the situation during the supply chain crisis during the epidemic.

It was under such expectations that before the tariff measures for imported cars in the United States were implemented, the US market showed a strange scene: on the one hand, Japanese and Korean automakers hurriedly transported cars and a large number of core components to the United States, and on the other hand, American consumers set off a craze for purchasing foreign-branded cars.