According to analysts, Chinese automakers could be one of the surprising beneficiaries of President Donald Trump’s trade war, as 25% tariffs on imported vehicles and auto parts are in effect.
The White House argues that tariffs are needed to protect the US automotive industry and strengthen the country’s industrial base and supply chain.
The US imported $475 million worth of auto parts, engines and vehicles last year, according to the Bureau of Economic Analysis, primarily from Mexico, Japan, South Korea, Germany and Canada.
China’s presence in the US automotive industry has been limited since Trump launched his first trade war in 2018 and imposed tariffs on $380 billion worth of Chinese goods.
According to automotive market research firm Jato Dynamics, “light vehicles” made in China (cars, vans, motorcycles) accounted for just 0.4% of US lightweight vehicle sales in 2024.
This limited presence is primarily due to the low US brand awareness of Chinese automakers and the 100% tariff imposed by US President Joe Biden last year.
From 2027 onwards, the US will also ban the sale of “connected vehicles” hardware or software made in China for national security reasons.
These systems were commonly found in EVS, allowing vehicles to exchange data via Bluetooth, Wi-Fi or satellites.
Sam Fiorani, vice president of global vehicle forecasting at Autoforecast Solutions, said Chinese automakers could offer long-term benefits as they are less affected by US tariffs than their global competitors.
“Chinese brands are currently weakening their competitors as European, Japanese and Korean brands are putting financial strain on the US market. The cost of doing business in the US hurts all carmakers in that market, but Chinese carmakers do not rely on the US for significant revenue.
Chinese automakers could potentially be more cost-competitive in other markets as their competitors face higher costs due to tariffs, Fiorani said.
Experts say profits are most obvious in the EV market, even if they remain locked out of the US.
China controls both EV production and battery production, and last year its EV power surpassed Elon Musk’s Tesla in annual global revenues due to strong domestic sales.
China has six of the world’s top 10 EV battery manufacturers.
Trump’s tariffs are expected to have a limited impact on Tesla, which is not dependent on foreign parts, but experts say it will harm South Korean competitors, like Hyundai in Korea, Nissan in Japan, and BMW and Mercedes in Germany.
Tu Le, founder and managing director of Sino Auto Insights, said Trump’s tariff policy and push for US land manufacturing could lead to American brands becoming less competitive in the long term and ultimately benefiting China.
“The reality is that if things continue like the US automotive industry, it could be uncompetitive in four years. Rather than investing in clean energy or charging for infrastructure, they are focusing on bringing factories back to the US,” Lu told Al Jazeera.
However, according to Nick Malo, Asia’s leading economist in Economist Intelligence Unit, Chinese auto parts suppliers could suffer greater radioactive fallout from tariffs than automakers due to their high exposure to the US market.
“Chinese automakers aren’t selling much in the US, especially due to the high tariffs on electric vehicles that are often dominated by Chinese brands. However, Chinese auto parts manufacturers have historically seen the US as a major market,” Malo told Al Jazeera.
“If disruption occurs, it is likely to affect some of the intermediate components of the supply chain, and could affect the final assembly of US vehicles.”
A key issue surrounding Trump’s automobile fares is how it affects China and other foreign manufacturers that have moved to Mexico to capitalize on the US-Mexico-Canada Agreement (USMCA) and its proximity to the US border.
Following Trump’s 2018 trade war with Beijing, many Chinese manufacturers moved their businesses to Southeast Asia and later Mexico to avoid tariffs.
As a result, trade between Mexico and the US has skyrocketed, surpassing China in 2023 to become the US’s top trading partner.
In 2024, Mexico supplied more than 40% of US auto parts, but many came from factories in China that established operations there over the past eight years.
The Mexican and Canadian automotive industry will receive some exemptions from Trump’s 25% tariffs thanks to the USMCA, but EIU’s Marro said it is expected that Mexico City will reevaluate its Chinese manufacturing base as it seeks to negotiate additional tariffs.
During last year’s presidential election, Trump falsely claimed that Mexico allowed Chinese automakers to build factories that would ship finished vehicles to the United States without paying taxes.
The issue remains a point of contention, especially after Trump returned to the White House in January.
The Financial Times reported last month that the Mexican Department of Commerce had delayed approval of the BYD manufacturing facility due to concerns that smart car technology could make it across the US border.
Tu Le of Sino Auto Insights said some Chinese companies may be seeking permission to set up manufacturing in the US.
“I think there will be a great opportunity for Chinese automakers to negotiate how to build them in the US. I think the Trump administration may see investments happening in the EU,” he said.
Such developments followed similar moves by other Asian automakers, including South Korea’s Hyundai, and recently announced a $21 billion investment in the US ahead of tariff deadlines.
Ilaria Marzocco is a senior fellow specializing in Chinese business and economics at the Center for Strategic and International Studies (CSIS), who said the outlook for Chinese automakers remains uncertain due to current restrictions on “connected vehicles” imposed by the Bureau of Industry and Security in January.
“I think a lot of people are speculating about the deals Chinese automakers invest in the US, but aside from challenging politics, the current limits on connected vehicles will be very difficult,” Marzocco told Al Jazeera.