May 4, 2025•The Tariff Research Company

245% China EV Tariff: What It Means for SMEs

The global trade landscape has once again witnessed a significant upheaval with President Donald Trump's announcement in May 2025 of a staggering 245% import tariff on electric vehicles (EVs) originating from China. This move, part of an escalating series of trade measures against China, is aimed at curbing the burgeoning dominance of Chinese EV exports. While the immediate focus is on the automotive sector, the implications of this decision are likely to reverberate far beyond, potentially affecting small and medium-sized enterprises (SMEs) across a wide spectrum of industries in the US, UK, and globally.1 This development signifies a decisive shift in trade policy, one that demands careful consideration and proactive planning from businesses of all sizes.

Why This Tariff? What’s Behind the 245% Move?

The imposition of this substantial tariff must be viewed within the broader context of the long-standing trade friction between the United States and China.2 For several years, a trade war has been brewing, characterized by increasing tariffs and retaliatory actions from both sides. In 2025, this conflict has intensified, with the US implementing a 145% tariff on Chinese goods and China responding with a 125% tariff on American products.2 The decision to specifically target electric vehicles with an even higher 245% tariff underscores the strategic importance of this sector.

Several economic motivations likely underpin this aggressive move. Firstly, it serves as a potent measure to protect the nascent US domestic EV manufacturing industry from intense competition posed by potentially lower-priced Chinese EVs.3 Concerns have been growing regarding China's rapid advancements and increasing market share in the global EV market. The US government likely aims to provide a shield for American manufacturers to grow and innovate without being undercut by imports. Secondly, the tariff can be seen as a direct response to the significant subsidies that the Chinese government provides to its EV industry.6 These subsidies are viewed by many in the US as unfair trade practices that allow Chinese manufacturers to offer EVs at prices that do not accurately reflect their true production costs. By imposing a high tariff, the US intends to level the playing field and counteract the effects of these subsidies. Beyond these economic factors, there may also be a strategic element related to domestic politics. A strong stance on trade with China, particularly in a high-visibility sector like electric vehicles, could resonate with certain segments of the American electorate.7

This significant tariff on Chinese EVs prompts several crucial questions for SME owners. Is this action solely focused on the automotive industry? Given the ongoing trade tensions and the potential for similar concerns in other sectors where China holds a strong export position, such as electronics and renewable energy 3, it is prudent to consider that this could be a precursor to broader trade measures. What other industries might be next in line for similar tariffs? Businesses importing or using components from China in sectors like electronics, solar panels, or even general consumer goods should be particularly attentive. Finally, how should a business interpret this development as a signal? This move strongly suggests a potential long-term shift towards protectionist trade policies, emphasizing the need for SMEs to prioritize supply chain diversification and build greater resilience against global trade disruptions.1

Real-World Impact for SMEs

The imposition of a 245% tariff on Chinese EVs will have both direct and indirect consequences for SMEs, even those not directly involved in the electric vehicle market.

For UK and US firms that directly import or distribute EVs or EV parts manufactured in China, the impact will be immediate and substantial.6 The cost of importing these goods will more than triple, significantly impacting profitability and potentially necessitating considerable price adjustments for consumers. For instance, a US-based SME that imports electric scooters from China will face a dramatic increase in their import costs, likely forcing them to either raise prices significantly, potentially losing customers, or seek alternative suppliers, which may prove more expensive.1

The indirect impacts, however, could be even more widespread. The logistics sector might experience fluctuations in shipping volumes as EV imports from China decrease.12 Industries relying on metals like lithium, cobalt, and nickel, which are crucial for EV batteries and often sourced from or through China, could see shifts in demand and pricing.9 Similarly, the electronics sector, which supplies many components for EVs, including semiconductors, might experience indirect effects.3 The 245% tariff on EVs serves as a strong indicator that other sectors where China has a significant export presence, ranging from consumer electronics to textiles, could also face increased tariffs in the future, impacting SMEs that import these goods.1 Battery technology and semiconductors, being critical components not only for EVs but also for a wide array of other products, are particularly vulnerable to broader trade actions.3

This trade policy shift is likely to drive a significant reconfiguration of global supply chains. SMEs that have relied on China for cost-effective EV components or finished vehicles will need to explore alternative sourcing options in other countries to mitigate the impact of the high tariffs.1 This could lead to emerging opportunities for suppliers in regions like Taiwan, Mexico, South Korea, and Southeast Asian nations, which might become more attractive sources for EVs and their components.1 Furthermore, the increased cost of imports from China could incentivize some SMEs to consider bringing their manufacturing or assembly operations closer to their domestic markets, a process known as reshoring or nearshoring.1 For example, a UK-based SME that assembles EV charging stations using components sourced from China might now find it economically viable to explore sourcing those components from manufacturers within Europe or even establishing local production capabilities.

To further illustrate the potential ripple effects, consider the following:

Table 1: Potential Impact of US-China Trade Tariffs on Key Sectors for SMEs

Sector	Potential Impact	Examples for SMEs	Relevant Snippet IDs
Electronics Manufacturing	Increased cost of electronic components sourced from China or used in EVs.	An SME assembling electronic devices using Chinese semiconductors; a manufacturer of EV charging infrastructure.	3
General Retail	Potential for higher prices on a wide range of imported Chinese goods.	A small boutique selling imported clothing and accessories; an online retailer of household goods.	17
Logistics & Shipping	Fluctuations in demand for shipping goods from China to the US.	A small freight forwarding company; a local trucking firm involved in port transportation.	12
Renewable Energy Components	Increased demand for non-Chinese EV battery components; potential tariffs on raw materials.	A company supplying parts for solar panel installations that also use lithium-ion batteries.	9
Metal Fabrication	Potential tariffs on imported metals used in various manufacturing processes.	An SME producing metal components for the automotive or construction industries.	20

The impact of this tariff will not be uniform across all SMEs. Businesses heavily reliant on low-cost Chinese imports will face significant challenges 25, while those with more diversified supply chains or a focus on domestic products might find a competitive advantage.1 Furthermore, the possibility of China imposing retaliatory tariffs on US goods 1 could create new hurdles for SMEs that export to the Chinese market. The overall disruption to global supply chains 10 is likely to lead to increased lead times, higher shipping costs, and greater uncertainty in sourcing goods, requiring SMEs to develop more flexible and resilient strategies.

What SMEs Can Do Now

In the face of this significant trade development, SMEs need to take proactive steps to understand and mitigate potential risks.

Firstly, it is crucial to identify the extent of your business's exposure in its current product mix.18 Analyze your sourcing and sales data to determine your direct and indirect reliance on Chinese EVs, EV parts, or any other goods that could be subject to similar tariffs in the future. Understanding where your vulnerabilities lie is the first step towards developing effective strategies.

Secondly, begin to evaluate alternative suppliers in other regions.1 Research potential suppliers in countries like Taiwan, Mexico, South Korea, or Southeast Asia, considering factors beyond just cost, such as quality, reliability, ethical sourcing, and lead times. Diversifying your supplier base can significantly reduce your reliance on a single source and mitigate the risks associated with trade disruptions.

Thirdly, it is essential to monitor for sector spillover.2 Stay informed about the ongoing developments in the US-China trade relationship and be vigilant for any indications of potential tariffs being extended to other sectors relevant to your business, such as renewable energy, electronics, or raw materials. Proactive monitoring will allow you to anticipate potential challenges and adjust your strategies accordingly.

To assist SMEs in navigating these complex trade issues, we at The Tariff Research Company offer specialized services:

Clarity (£99): Our 12-hour custom tariff impact report provides a tailored analysis of how this 245% tariff, and the broader trade landscape, could specifically affect your business. We delve into your supply chain, cost base, and potential customer pricing implications, offering actionable mitigation strategies.
Pulse (£19/month): Our monthly subscription service provides real-time alerts and in-depth analysis of evolving global trade shifts. Stay ahead of the curve with up-to-the-minute information on new tariffs, trade agreements, and geopolitical developments that could impact your business.

Unsure how this 245% tariff could affect your supply chain, cost base, or customer pricing? Get a tailored Clarity report in 12 hours for £99—or monitor global changes with Pulse for just £19/month.

Conclusion

The imposition of a 245% tariff on Chinese electric vehicles is more than just a trade dispute affecting the automotive industry. It is a clear signal about the increasing fragility of global trade patterns and the potential for further disruptions across various sectors.2 For small and medium-sized enterprises, the key to navigating this evolving landscape lies in staying adaptive rather than reactive.16 Foresight and proactive planning are crucial to building resilience in the face of trade uncertainty. By understanding their exposure, exploring alternative options, and staying informed about global trade shifts, SMEs can not only weather these challenges but also identify new opportunities in a changing world. The Tariff Research Company is committed to providing the tools and expertise necessary to bring clarity and agility to these uncertain times, empowering SMEs to navigate the complexities of global trade with confidence.

Works cited