A Look Into Recent Tariff Hikes, Impacts and Gaining Visibility
In recent days, different governments across Europe and the US have announced increased tariffs in an effort to protect their domestic markets from targeted imports.
American View
Most notable is the quadrupling of import tariffs from Chinese Electric Vehicles sold in the US. The intent is to level the playing field for the US manufacturers, ensure fair competition, protect intellectual property and enhance economic security. However, it is widely anticipated that the implementation of these measures will have both positive and negative impacts on US manufacturing in the short and mid-term. New opportunities will unfold as a result of companies adapting to these new rules.
Sector Impact: There are some value chains, such as EV, automotive, and industrial, that will be affected more than others with tariffs increases for Lithium-ion EV batteries, battery parts, semiconductors, steel and aluminum. Assessing these impacts will be key to better anticipate and implement corrective action plans during 2024-26.
Company Impact: Monitoring the Chinese response for the US car or component makers (and sales) in China and preparing for it, will be one risk mitigation strategy. Scenario planning for potentially decreased critical minerals export to the US which could strongly impact some companies including domestic battery manufacturing and its suppliers, will be another risk strategy. In addition, the extent of these countermeasures, the actual degree of implementation of the announced measures and the timeline of it, will need to be monitored closely.
European View
The European Commission has set provisional duties of up to 37.6% on Chinese imported EVs to counter what it says are unfair subsidies and has initiated a so-called advisory vote. Not all EU members agree with these new measures based on whether they have a large domestic competing industry targeted by these tariffs (for example German carmakers made a third of their sales last year in China), or whether they are mostly an importer who will be impacted by higher tariffs (China-built cars of Western automakers such as Tesla and BMW).
Retaliation from China in other strategic sectors can be expected too. So, it is not a surprise that Germany has urged the EU to drop tariffs. In the advisory vote, France, Italy and Spain supported the tariffs, while Germany, Finland and Sweden abstained, per government sources.
Major European automotive manufacturers, criticizing the new tariffs include Volkswagen, Mercedes-Benz and Stellantis. Reports indicate investments and joint-production agreements that would enable them to stay competitive.
Other countries
Brazil is phasing in tariffs on all imported electric and hybrid vehicles of 10 percent since the start of this year, then 18 percent as of July, and finally, 35 percent in 2026. Another BRICS member, South Africa, levies a 25 percent duty on imported EVs.
There is a fine balance between increasing competitiveness of local producers and meeting growth objectives in the transportation electrification or decarbonization areas within the projected time frame. We are already seeing some signs in the EU of watering down the 2035 gas car phase out under electorate and price pressures.
How can Vertaeon support?
All these moving parts will have an impact in selecting winners and losers of these market shifts. Supply chain and enterprise risk management tools like Vertaeon SaaS Platforms can help your organization make informed decisions.
Understanding the tariff trends and impact
– Tracking tariff changes from supply sectors such as metals and semiconductors to automotives
– Tracking Price increases for commodities and components. As an example, MG, Nio have hinted at car price increases this year following EU EV tariff decision.
Understanding trade patterns
The granular mapping of the actual monthly impact on import/export volume per companies, sectors, regions,and actual plant facilities are increasingly critical in a changing regulatory landscape. It brings some level of certainty in an otherwise very volatile environment.
Assessing Scenarios
Will there be a price increase for key materials and finished goods? Will sales in China for domestic players be affected? Will key deadlines for EV adaptation be delayed? How is EU positioning in the US-China geopolitics? How does this affect global automotive and industrial players?
One thing is clear – the risk assessments have to be ongoing, dynamic and integrated to strategy planning for global manufacturing companies. Tariffs can play a big part of this in the mid-term and long-term location and investment planning. Contact us to learn more.
By Vertaeon LLC
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