US President Donald Trump has declared a 25% tariff on imported cars and auto parts, set to kick in next week. This decision is anticipated to ripple across the globe, impacting markets in the European Union (EU), Canada, India, and China. Although Indian car manufacturers may not feel the pinch right away, those producing auto components and tires for export to the US could face some serious repercussions.
US Tariff Policy and Its Global Impact
Trump’s Trade Strategy
President Donald Trump’s decision to impose steep tariffs on automobile imports aligns with his broader trade policies aimed at protecting American industries and boosting domestic manufacturing. By making foreign vehicles and components more expensive, the policy is expected to encourage companies to set up production facilities within the US.
Potential Retaliation from Other Nations
- EU, Canada, and China have condemned this move and are likely to impose counter-tariffs.
- Countries exporting large volumes of cars and parts to the US might reconsider their trade agreements.
- US consumers could face price hikes on cars, with costs increasing by up to $6,000 per vehicle.
Impact on the Indian Automotive Sector
• The US market isn’t a major player for Indian passenger vehicles and trucks, making up less than 1% of total vehicle exports.
• India mainly exports right-hand drive vehicles, which find their way to markets in West Asia, South Africa, SAARC nations, and various African countries.
• The two-wheeler industry is mostly untouched, as exports are primarily aimed at Southeast Asia, Africa, and Latin America.
Challenges for Auto Component Manufacturers
Indian auto component exports to the US hit $2.2 billion, representing 29% of all auto part exports from India. Tyre exports to the US were valued at ₹4,259 crore (about $500 million), making up 17% of India’s total tyre exports. The China+1 strategy, which global auto manufacturers have been adopting, had previously helped Indian exporters. But now, with the introduction of tariffs, those benefits might be at risk. Indian manufacturers like Sona Comstar, a supplier for Tesla, Sundaram Fasteners, which provides components for GM’s powertrains, and Tata Motors, responsible for Jaguar Land Rover sales in the US, could face some tough times ahead in terms of revenue.
