Tariff Turmoil: How U.S. Trade Policy Is Reshaping Global Manufacturing:

The tariffs imposed by the U.S. have impacted the global supply chain, leading to a gap in supply and demand. In addition, China faces up to 245% tariffs on products subject to Section 301, while the rest of the countries face only a 10% baseline tariff for 90 days. Various industries, such as automotive, semiconductor, aerospace, electronics, and others linked to the manufacturing sector, have been affected by these tariff changes, resulting in an increase in the price of finished products. Moreover, due to the uncertainty on how tariffs will be imposed or postponed in the coming months, the manufacturers are also assessing and working on various strategies to reduce the impact of tariffs on overall company performance.

Source: TradeImeX

Changing Tariff Environment in the Manufacturing Industry:

• The U.S. administration announced a 25% tariff on cars and car parts on April 3^rd. However, due to the industry's concerns, the latest provisions announced on April 29^th temporarily relieve businesses for two years. This move will help manufacturers strategize their supply chains and reassess their operations.
• In addition, there will be no tariff on cars, with 85% of their parts complying with the USMCA deal and manufactured domestically.
• Amid tariff uncertainty, major auto companies, including General Motors, Volvo, Mercedes-Benz, Stellantis, and Volkswagen, have suspended their financial guidance. The companies are reworking various strategies based on evolving tariffs.
• According to the Anderson Economic Group, auto manufacturers will still face price impacts ranging from $2,000 to $12,000, though a tariff relaxation was announced.
• Volvo announced a $1.8 billion cost-cutting initiative by reducing business investments and operations.

Impact of Tariffs on Manufacturing Sector in Key Countries:

China:

China witnessed a sharp decline in its manufacturing facilities at the start of the second quarter due to high tariffs imposed by the U.S. According to the National Bureau of Statistics, the purchasing managers’ index (PMI) - a key measure of industrial output was down to 49.0 points in April. Due to tariff uncertainty, the businesses lowered their inventories and paused production. However, China plans to offer a stimulus package to curb the economic slowdown, and it is working on new policies that will be rolled out in the second quarter. These initiatives will temporarily assist the country in maintaining a stable economy.

Source: U.S. Census Bureau

Japan:

Japan exports more than 1.5 million vehicles a year to the U.S. The auto companies, including Mazda and Honda, have been significantly impacted by the tariffs. The businesses are reassessing supply chains and production costs to reduce further impact. According to CEIC Data, in March 2025, the country saw an overall decline of 1.1% in industrial production and 8.4% in the auto sector compared to March 2024. To mitigate the tariff impact, manufacturers have reduced their production and will make future decisions based on the evolving tariff rates. Japan is one of the countries in talks with the U.S. for trade deals to overcome the high tariffs. As of May 2^nd, 2025, there was a discussion for trade negotiations between the U.S. and Japan for different industries and products, including the auto sector.

New Era for U.S. Production Facilities

As the tariffs hit the manufacturing sector, companies are working on various strategies, such as cost-cutting, expansion of production facilities, and aiming at domestic manufacturing to mitigate the impact. Various manufacturing companies have already announced investing more in the U.S., such as:

• Johnson & Johnson plans to invest $55 billion in U.S. manufacturing.
• Hyundai announced it will invest $21 billion in domestic manufacturing from 2025 to 2028.
• Honda is planning to move its production of the Civic Hybrid Hatchback from Japan to the U.S. to bypass the tariff.
• Volvo plans to expand its production facility in South Carolina to include more models.

Strategic Recommendations for Industry Leaders

To stay competitive in this evolving environment, companies must adopt a more resilient and agile approach to operations.

Recommended Actions:

• Negotiate a trade deal with the U.S.
• More investments in automated manufacturing technologies
• Prioritize domestic investments where incentives are available.
• Re-evaluate global sourcing models and regional dependencies.
• Global diversification of production facilities.

How BCC Research Can Support Your Strategy

BCC Research provides trusted, data-driven intelligence that helps manufacturing companies navigate global trade volatility. Our insights are designed to support decision-makers as they assess market shifts, cost implications, and competitive positioning in a changing world.

Our Services Include:

• Custom analysis on the impact of tariffs and trade shifts.
• Forecast modeling for supply chain costs and risks.
• Reshoring and manufacturing opportunity evaluation.
• Market positioning insights across technology, materials, and manufacturing.