China’s additional 10% tariff on U.S. vehicles with larger engines came into effect on Monday, following the two nations’ failure to reach an agreement on the Trump administration’s broad tariffs on Chinese goods.
According to Chinese state broadcaster CCTV, the new tariff applies to imports of vehicles with engines larger than 2.5 liters, raising the total duty to 25%.
While exports of such vehicles are relatively small compared to the number of cars that companies like General Motors Co. produce domestically with joint venture partners, U.S. manufacturers still shipped approximately $3.1 billion worth of larger-engine vehicles to China last year, based on customs data.
The increased tariff impacts automakers such as GM and Ford Motor Co., both of which are already facing challenges in China as consumers shift to electric vehicles produced by domestic brands, particularly BYD Co. GM previously reported over $5 billion in charges and writedowns linked to its struggling China operations.
Bloomberg Intelligence on tariff war
Mercedes—and to a lesser extent, BMW—face moderate exposure to China’s additional 10% tariff on U.S.-imported SUVs and pickups. Both German automakers use the U.S. as a global production hub for SUVs, but since 2022, BMW has been manufacturing its high-margin X5 model locally, reducing its vulnerability. For Mercedes, the tariff could lower earnings before interest and taxes (Ebit) by 1.5% in 2025, unless offset by measures like price increases—though that may prove difficult, given that SUVs in China already sell at an average 15% discount to their list price, according to BI automotive analyst Michael Dean.
To attract affluent Chinese consumers, GM introduced Durant Guild in 2022, a premium import service offering models such as the GMC Yukon and Chevrolet Tahoe, both equipped with engines of 3 liters or more.
However, the situation remains fluid, similar to when former U.S. President Donald Trump threatened tariffs on Canada and Mexico before postponing them following negotiations. Trump has stated he will soon speak with Chinese President Xi Jinping, while China’s Ministry of Foreign Affairs has also called for dialogue and consultation to prevent an escalation into a full-blown trade war.
