15/04/2025
Quantifying the Effects of the Trade War on European and Hungarian Automotive Suppliers
The 25 percent vehicle import tariff introduced by the United States in April 2025 came as a complete surprise to industry stakeholders and analysts alike. The general belief had been that the automotive sector would be exempt from such measures, or that the threat was merely a negotiating tactic aimed at increasing pressure on trade partners. That has proven not to be the case — and now, rapid replanning is required.
To understand how the trade war — in particular, this new US measure — affects European automotive suppliers, we must first look at the structure of US automotive trade.
The chart below highlights two key dimensions:
1. The volume of vehicles exported to the US from a given region
These shipments are directly affected by the tariff. While manufacturers may absorb part of the additional cost, US vehicle prices will inevitably rise — not by the full 25 percent, but close to it. As a result, demand will decline, and both automakers and their suppliers will face production volume losses.
It is not only the absolute export volume that matters, but also the share of each region’s vehicle output that is destined for the US. The higher this proportion, the greater the exposure.
2. The volume of vehicles imported into that region from the US
This determines whether the region is in a position to introduce counter-tariffs. If US-made vehicles make up a significant portion of local sales, retaliatory tariffs would trigger major price increases — a politically and economically risky move.
It is the balance between export exposure and import dependence that determines which regions are truly vulnerable.
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Trade Exposure by Region
Canada is the most affected. Over 82 percent of its vehicle production is exported to the US, while 45 percent of its domestic vehicle sales rely on US imports. This leaves Canada with very little room for retaliation without damaging its own market. Accordingly, current Canadian countermeasures apply only to the US value-added portion of imported vehicles and exclude those produced under USMCA/NAFTA.
Mexico is the second most exposed: it exports 2.5 million vehicles to the US, accounting for 64 percent of its total output. However, imports from the US total just 200,000 vehicles — just over 10 percent of domestic sales — meaning Mexico has more theoretical room to respond, even if that is politically unlikely.
South Korea and Japan also face significant exposure. Korea exports roughly one-third of its vehicle output to the US, while importing fewer than 50,000 US-made vehicles. Japan exports 1.4 million cars and imports only 20,000. Both countries could introduce counter-tariffs without impacting their own markets, but would suffer meaningful export losses in return.
China is essentially unaffected, as vehicle trade with the US is negligible in both directions.
Europe exported 885,000 vehicles to the US in 2024, representing 6.1 percent of total production. This is a manageable ratio, especially as most exports are premium models where part of the cost increase can be offset by margin. However, brands without US production capacity — for them the US-bound share is effectively 100 percent — are already forced to act. For example, Jaguar Land Rover and Audi have temporarily suspended exports to the US in order to rethink their strategies.
US exports to Europe represent just over 1 percent of total sales and primarily consist of Mercedes and BMW SUVs produced in the US. As a result, counter-tariffs from Europe would offer limited commercial value.
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Market Impact: Global Slowdown, Local Realignment
We estimate that global vehicle production will decline by nearly 12 million units by the end of 2026 as a result of the current tariff measures. Rather than recovering, the market is expected to contract in 2025 and remain below 2024 levels in 2026.
At Top Tier Consultants, we are currently quantifying the global impact in a way that is directly actionable for our clients. For suppliers, the key is not to understand general trends — but to assess their specific revenue exposure. That is why we are building detailed, bottom-up forecasts — at OEM, platform, program, and even sub-variant level — to provide an accurate view of production and demand shifts.
These forecasts will be finalized in early May.
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What This Means for European and Hungarian Suppliers
For European — and especially Hungarian — suppliers, there is little use in expecting early or clear communication from customers. OEMs and Tier-1s themselves are operating under high uncertainty. In most cases, suppliers receive no forecast updates — or if they do, it is delayed and vague.
Decisions are made internally by the customers, but the supply base often only becomes aware of them through declining order volumes.
This situation is further complicated by long-term structural changes already underway in the industry. These include delays in the start of production for new EV programs, uncertainty about the end of production for ICE platforms, and anticipated changes to the EU’s "Fit for 55" regulatory framework — changes that have not yet been fully announced. Together, these dynamics are shifting both SOP and EOP timelines. Suppliers must prepare for impacts on both ends of the production cycle.
This is not a temporary disruption. It is a structural transformation — in where, how, and in what volumes cars will be produced.
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How Top Tier Consultants Can Help
Top Tier Consultants is actively supporting suppliers in quantifying the commercial impact of trade-related and regulatory shifts.
We analyze how OEM production footprints are evolving by region and platform.
We develop program- and variant-level forecasts and map these against each client’s specific revenue composition.
Based on this, we quantify the expected impact on top-line revenue, support production and capacity planning, and help inform commercial decision-making.
Our goal is to enable suppliers to act earlier and with more confidence — not to simply react after the fact.
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What Comes Next
Our full scenario-based forecasting model will be complete in the first week of May. After that, we will be available to support suppliers individually in understanding their exposure — broken down by customer, platform, program, and variant.
We invite all automotive suppliers to contact us and arrange a one-on-one consultation, during which we will assess the relevant scenarios and necessary actions together.
Top Tier Consultants helps you turn uncertainty into strategy — and prepare for the next phase of European automotive transformation, even before market growth returns.
www.toptierconsultants.com
