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

Cars are stacked for loading onto a ship for export at the port in Taicang, in China's Jiangsu Province, 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 are set to take full effect, making its 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 growth in 2024, according to a China Association of Automobile Manufacturers 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 last month’s strong showing of overall Chinese exports: 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 many new 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 as is the case with other emerging market economies.

In addition, it has yet to develop a well-integrated market in which 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 with 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 its exports was small and the scope narrow—it doesn’t work in the present environment, now that its exports have expanded. This pits the world’s second-largest economy against its major trade partners, including 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 the EU rather than domestic innovation. This forces Chinese exporters to compete on price rather than genuine product differentiation, as evidenced by falling wholesale prices, or deflation.

The price competition in turn 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, and in just a matter of days, the new U.S. administration is expected to impose its own new tariffs, which will extend beyond EVs.

The China Association of Automobile Manufacturers’ 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.”

Koimisis believes that there could still be consequences 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.