BofA sees more impact on China auto part makers than auto OEMs from tariff hike

Published 08/04/2025, 08:10
© Reuters.

Investing.com -- The Trump administration last week introduced a 34% tariff hike on imports from China, a measure that comes on top of the 20% hike implemented earlier this year. The latest tariff increase is set to come into effect on April 9.

On March 26, President Trump declared that a 25% tariff would be imposed on light vehicles and certain key auto parts, with the new rates effective from May 3. However, parts that meet the USMCA standards will have the opportunity to certify their U.S. content, and the tariff will only apply to the non-U.S. portion of their value.

Importantly, the new 34% reciprocal tariffs will not be additive to the 25% tariffs on most auto and auto parts imports.

According to Bank of America analysts, China's automakers will likely see minimal effects on vehicle exports to the U.S. In 2024, only 107,000 vehicles were exported from China to the U.S., representing a mere 1.7% of China's total vehicle exports and 0.3% of its vehicle wholesales.

Similarly, the retaliatory tariffs imposed by China on U.S. vehicle imports are expected to have a limited impact, given the small volume of imports, which in 2024 included 109,000 vehicles from brands such as Mercedes Benz (ETR:MBGn) and BMW (ETR:BMWG).

“China’s auto parts imported from the U.S. is relatively limited and those are mainly chips. We see cost hike pressure on China vehicles as manageable after China increases the import tariff to 34%,” BofA analysts said in a note.

However, the situation appears more challenging for China's auto parts manufacturers. BofA predicts that the profitability of these companies in the U.S. market will suffer, especially for those with a significant export volume to the U.S.

The tariffs are expected to particularly impact the battery sector, with electric vehicle (EV) batteries exported from China to the U.S. facing a tariff of 73.4%.

Energy storage system (ESS) batteries will also see an increase, with tariffs rising to 64.9% from April 9, before climbing to 82.4% in 2026, analysts said.

BofA's China economists project that the cumulative effect of the new tariffs this year could reduce China's growth by one percentage point in 2025.
Responding to the U.S. measures, China has announced a 34% tariff hike on all goods imported from the U.S., starting April 10.

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