America And China Come To A Trade Agreement, But Cars Will Only Go In One Direction

Business Mayor

18-05-2025

A new trade deal between China and the U.S. may have made some progress that will help the auto sector. Both sides agreed to vastly lower tariffs than had been in place. Though they're still significantly higher than before, they still block low-cost EVs from the country, and the tariff rollbacks are, once again, only temporary. It is more lack of stability for an industry that craves it.
Over a series of hops and jumps, President Trump had raised tariffs on goods from China to 145 percent. China had raised tariffs on U.S. goods to 125 percent, largely in response. This new temporary rollback will see the U.S. drop its fees to 30 percent, with China lowering its own to 10 percent.
Temporary Reduction Keeps Fees On Cars
The White House
While this is no doubt a boon for companies like Amazon, and for consumers ordering direct from companies like Temu, it won't make things easy for the auto industry. The White House announced that all tariffs applied to Chinese goods prior to April 2, 2025, would remain in effect.
That means that the 25 percent tariff on vehicles and parts remains in effect. It also includes the 25% tariffs on aluminum, steel, and related products. Other tech products, including smartphones and chips, had already received exemptions from the increased fees.
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Last week, Lincoln announced that it would pause imports of the Nautilus until the 2026 model year as a result of the tariffs. It is built in Hangzhou. Lincoln said it had enough units in stock, suggesting it wasn't selling well anyway. The current $55,000 starting price will likely climb, even if the new tariff is 30 percent and not 145.
The 100% tariff on imports of electric vehicles from China imposed under the Biden administration and the 25% EV battery tariff that came with it are still in effect. That essentially continues to block Chinese EVs from being sold in the U.S., as it would make prices prohibitive.
Nearly Every Vehicle Has Some China Content
So while clothing and gadgets might not suffer from parts price increases, most automotive products will. More than $18 billion in car parts come from China to the U.S. each year, including OE and aftermarket replacement parts as well as components for new vehicles.
Even U.S.-built vehicles rely on foreign parts, including parts from China. Mercedes-Benz models built in Alabama, for example, contain up to 90% foreign parts content. Tesla's vehicles have at least 25% foreign content, and the built-in-America Ford F-150 contains just 45% U.S.-sourced parts. Interestingly, despite being assembled in China, the Lincoln Nautilus has five percent U.S.-made parts content, all according to NHTSA documents.
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The automaker will sell its Chinese-built Lincoln Nautilus from existing stockpiles until the 2026 model year changeover.
The White House refers to it as a historic deal. However, the negotiations, which took place in Geneva, came only to a temporary solution. If a permanent deal hasn't been worked out in 90 days, the 115 percentage point tariff increase will come back into effect. Automakers love stability because their new products cost billions to develop and rely on being able to spend several years with stable prices. The current trade battle the U.S. is waging may result in the lowest new-vehicle production figures worldwide since 2020.