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Tariff Tsunami: U.S. Slaps 25% Duties on Global Autos and Plastics
April 04, 2025
Effective April 3, 2025, the United States initiated a sweeping new round of tariffs targeting global automotive markets. Under a proclamation signed by President Donald Trump, a 25% tariff now applies to all imported passenger vehicles, regardless of country of origin. The move marks a significant escalation in U.S. trade policy and is expected to trigger considerable disruption across international supply chains.
In a further move set to intensify pressure on the automotive industry, an additional 25% tariff will take effect on May 3, 2025, covering a broad spectrum of vehicle components ranging from engines and transmissions to electrical systems and powertrain parts. The tariffs were enacted under Section 232 of the Trade Expansion Act of 1962, citing national security concerns.
US buyers of polymers and automotive materials are now reconsidering sourcing options, with a shift toward domestic suppliers becoming more attractive due to the increased cost of foreign imports. In the plastics sector, this could reduce competitiveness for foreign producers and bolster demand for US produced resin, particularly Polypropylene and Polyethylene but raises challenges for the latter, PE, that has become ever more reliant on exports. Monthly PP imports, which had reached roughly 90 million pounds, may decline as buyers seek US based alternatives.
With the global trade order in flux, the full scope of these policy changes remains unclear. While some nations may seek negotiated relief or exemptions, others are expected to retaliate. As the international response unfolds, the US stance suggests a broader strategy aimed at reshaping supply chains and boosting domestic industry though at the risk of economic blowback and strained trade alliances.
The Trump administration's approach is rooted in a formula tied to trade deficits. For instance, the tariff rate imposed on a country is calculated as half of its trade surplus with the US as a percentage of its total exports to America. This has placed countries with substantial trade surpluses, such as China, under especially heavy pressure.
Outside of North America, the European Union faces a 20% tariff on polymer related exports to the US, while Asian nations such as China, Japan, Taiwan, and Vietnam are confronting new duties ranging from 10% to 49%. These measures combined with the vehicle and component tariffs are set to upend global sourcing strategies and increase costs across manufacturing sectors, particularly for automotive and plastic goods.
Canada and Mexico, though initially impacted by broad tariff announcements, have received conditional relief under the USMCA framework. Vehicles and auto parts that meet USMCA rules of origin may qualify for partial or full exemption, provided importers secure appropriate certification from the U.S. Department of Commerce. However, that exemption is temporary, pending the development of a method to apply tariffs solely to non US components.
Notably, vehicles or components failing to meet USMCA criteria could be subjected to cumulative tariffs. In such cases, the 25% vehicle tariff, an earlier 25% steel and aluminum tariff, and the standard 2.5% Most-Favored Nation rate could result in a staggering combined duty of up to 77.5%.
Customs compliance has also come under the spotlight, with businesses urged to assess their surety bonds and duty liability under the new tariff regime. The US government has explicitly stated that no duty drawback or refunds will be allowed under these tariffs.
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