On March 26, 2025, the U.S. issued a press statement detailing tariffs on vehicles manufactured outside the U.S. In short, from April 3, all finished vehicles produced outside the United States will be subject to a 25% tariff, and the auto parts tariff will be imposed no later than May 3. The adjustment of automobile tariff policy may have a far-reaching impact on the supply chain, market demand, and enterprise competition pattern of the semiconductor industry. As a key part of the process of automotive intelligence and electrification, semiconductors are deeply bound to the automotive industry, from on-board chips to various sensors. Trump's proposed 25% auto tariffs may seem like a trade policy in the automotive sector, but in fact they will cause ripples in the semiconductor industry chain. Against this backdrop, TechInsight has released its insights, the industry's authoritative platform for providing actionable and in-depth intelligence to semiconductor practitioners and followers. The following is a summary of the core content of China Exportsemi:
A 25% tariff on imported cars would obviously have a significant impact on car sales. Sales of domestically produced vehicles in the U.S. are more complex, largely dependent on the final tariff arrangements on imported components. One possibility is that demand for models in the U.S. will increase. However, if the prices of these models also rise, demand will be suppressed. TechInsights assesses that prices are likely to rise across the board, whether it's a domestically produced or imported car. The price of domestically produced vehicles in the United States has risen, partly because of the increased cost of imported parts, but also because automakers have taken advantage of the price increases, after all, they have seen that their competitors have largely lost their price advantage due to tariffs.
Given the many uncertainties, TechInsights offers a series of scenario analyses on the impact of these tariffs on semiconductor demand. Prior to the implementation of the tariffs, TechInsights estimated that the value of semiconductors in cars and light trucks sold in the U.S. in 2025 would be approximately $16.7 billion.
Best-case scenario: For the remainder of 2025, sales of domestically produced models will increase by 10% and demand for imported models will decline by 20%. This will result in a $250 million reduction in the value of semiconductors sold in vehicles sold in the U.S. for the remainder of 2025, which is 1.5% of the total annual demand projected before the tariffs are implemented.
Increasing demand for U.S.-made models requires a swift and reasonable (in the view of automakers) to resolve the current uncertainty over parts tariffs in Canada and Mexico, while avoiding the opportunity to raise prices sharply. Shares of automakers like Ford and General Motors, which are dominated by the U.S. market, fell in after-hours trading, suggesting that the market believes that such an ideal scenario is unlikely.
Demand for imported models has fallen by only 20 percent, meaning that imported automakers are responsible for a large portion of the tariffs themselves. At the same time, auto finance providers should assume that the price ratio of imported vehicles at the end of the lease period will be similar to or even higher than before the implementation of the tariffs, and the lease interest rate will not be significantly increased.
According to TechInsights, it is more likely that demand for domestically produced models in the U.S. will fall by about 10% and demand for imported models will fall sharply by 30%. This will result in a $2.3 billion reduction in the value of semiconductors sold in vehicles sold in the U.S. for the remainder of 2025, which is 14% of the total annual demand projected before the tariffs are implemented.
The decline in demand for U.S.-made models is based on the assumption that the price of parts for these models will increase due to import tariffs, which in turn will have to increase vehicle prices.
The 30% drop in demand for imported models assumes that the price of imported models rises significantly, making them unattractive compared to domestic U.S. competitors.
Figure: The impact of tariffs on automotive semiconductor sales
The scenario also assumes a broad setback in U.S. consumer confidence, at least in the short term. Some potential buyers may choose to postpone the purchase of a new vehicle and wait and see what happens in the market and their own financial situation.
The worst-case scenario is a significant drop in demand for all vehicles, regardless of where they are produced. Sales of vehicles produced in the U.S. could fall by 30 percent and imported models by 50 percent. This will result in a significant $4.8 billion reduction in the value of semiconductors sold in vehicles sold in the U.S. for the remainder of 2025, which is 29% of the total annual demand projected before the tariffs are implemented.
This serious impact is considered unlikely. But this could happen if the Trump administration's ongoing tariffs go far beyond the auto sector trigger a massive and protracted global trade war. This will affect living standards around the globe and, in turn, the demand for new vehicles.
Other countries are likely to impose retaliatory tariffs on American cars, but American car exports far less than they import, which is one of the core reasons for Trump's tariff policy.
The global trade war will lead to higher prices, reducing the purchasing power of global consumers, which in turn will hit car sales outside the United States. In 2025, every 1% decline in car sales outside the U.S. means that the semiconductor industry will lose about $500 million in revenue for the remainder of 2025. As a result, a 5% drop in sales would result in $2.5 billion in lost revenue, which is more than what we would have lost in a medium-impact scenario for the U.S. market.
Key impacts
President Trump has called these specific tariffs "permanent" and won't be lifted anytime soon, but it remains to be seen what actually happens. What is less clear is whether the series of other tariffs that the Trump administration has announced or plans to impose will be permanent, and how long retaliatory measures by U.S. trading partners will last.
As mentioned earlier, these tariffs are likely to have a direct negative impact on U.S. car sales in 2025, while the overall impact of the global tariff environment could end up being even greater.
Next steps
These tariffs will create significant headwinds for automotive semiconductor demand in 2025, severely disrupting corporate business plans and investment decisions.
However, the fundamentals of the automotive semiconductor market remain sound. The long-term growth of automobile production is still a high probability event. Assuming a more stable economic and trade environment, many of the sales volumes that may have been lost in 2025 are expected to be recouped in 2026 and beyond.
The increase in the semiconductor content per vehicle is also an inevitable trend. In the medium to long term, the market will continue to grow.
Admittedly, this U.S. policy will directly lead to difficult decisions for companies. TechInsights expects that some small automakers may opt out of the U.S. market, while large enterprises and their suppliers will continue to invest in U.S. factories.
In the long run, however, automakers and suppliers should focus on the Chinese market at least as much as the U.S. market. Even before these tariffs were announced, the fastest-growing demand for automotive semiconductors was mainly Chinese automakers.
The question now may be how to recalibrate business plans to mitigate the impact of these tariffs. And for many global companies, the question of the future remains how to respond to the shift of the automotive industry to the east. These tariffs are likely to accelerate this trend, not slow it down.
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