China Vehicle Export Growth to Slow in 2025 Due to EU and US Tariffs

Cars are stacked ready to be loaded onto a ship for export at the port in Taicang, in Jiangsu Province, China, on July 16, 2024. AFP via Getty Images

News Analysis

China’s vehicle export growth is expected to drop sharply in 2025 as tariffs from the European Union and the United States will take full effect, making the country’s automobile manufacturers less competitive. The forecast reflects a broader slowdown in China’s exports and economic growth in the new year.

The world’s second-largest economy’s vehicle sales are expected to rise by 5.8 percent to 6.2 million units in 2025, down from 19.3 percent in 2024, according to a China Association of Automobile Manufacturers (CAAM) report released on Jan. 13.

The tamed forecast for China’s vehicle export growth for the new year contrasts with the strong overall export growth for December 2024., which marked the ninth consecutive month of volume growth and the most significant value growth in three years.

However, there is a reasonable explanation for the strong showing of the overall Chinese exports last month: the front-loading of orders by some manufacturers, including automakers, in anticipation of further tariffs, notably from the United States under the second Trump administration. This prospect could explain a 15.6 percent jump in China’s exports to the United States, the highest among all export destinations.

The situation could change this year when these tariffs take full effect. They will hit China’s electric vehicle (EV) sector hard as it tries to compete against U.S. pioneer Tesla. They could also affect the country’s overall economic growth, which is already slowing, as exports are still a big part of its economy.

Despite China’s economic progress over the past 30 years, the country has yet to transition to a consumer society to power economic growth, as was the case with the world’s largest economy—the United States—and other emerging market economies.

In addition, it has yet to develop a well-integrated market where commodities can flow freely across regions, similar to the United States and the European Union.

As a result, China continues to depend on exports for economic growth. As of 2023, the country’s exports accounted for nearly 20 percent of GDP compared to 11 percent in the United States.

While this strategy worked in the early days of China’s opening to world markets when the scale of exports was small and the scope narrow, it doesn’t work nowadays, as its exports have expanded. It pits the world’s second-largest economy against its major trade partners, such as the United States and the European Union.

In addition, China’s export strategy is based on imitation, copying, and replicating products developed mainly in the United States and EU rather than domestic innovation. This forces Chinese exporters to compete on price rather than genuine product differentiation, as evidenced by the falling wholesale prices, or deflation.

However, the price competition harms the economies of China’s trade partners, prompting them to take measures to mitigate the adverse effects of such competition, including countermeasures such as tariffs.

In October 2024, for instance, the EU imposed a 45.3 percent tariff on Chinese EVs, while it’s a matter of days before the new U.S. administration imposes its new tariffs, which will extend beyond EVs.

CAAM’s warning of lower export vehicle growth in 2025 has come as no surprise to Georgios Koimisis, associate professor of economics and finance at Manhattan University.

“Higher tariffs in certain markets are pushing Chinese automakers to rethink their strategies—especially focusing on hybrids—which can lead to fresh ideas and innovation,” he told The Epoch Times via email.

“For the average consumer, any small price changes could be balanced out by the broad range of global brands, all competing for a piece of the market.”

Koismsis believes there could still be knock-on effects if fewer Chinese cars reach overseas markets, such as minor supply hiccups or fewer options in specific areas.

“However, the global auto market is quite resilient, and over time, other auto manufacturers will adapt, helping to maintain a steady supply and variety for buyers,” he said.