As President Trump intensifies his trade war after a three month pause on the “reciprocal” tariffs announced in early April, the international trade environment has never been more volatile. Recent tariff threats targeting Canada, the EU, Mexico and others underscore how quickly trade dynamics can shift, with potentially far-reaching consequences. The challenge for global businesses is not only to assess immediate impacts, but also to remain strategically agile as events continue to unfold.
Uncertainty is now the only certainty
In the week following 8 July – marking the end of the 90-day pause on the sweeping “reciprocal” tariffs that Trump imposed in early April – the US announced new tariff rates on a wide range of countries: 35% on Canada, 30% on the EU and Mexico, and 25% on Japan and South Korea, alongside a 50% levy on copper imports. The latest round of threats also includes the possibility of future secondary tariffs of up to 100% on countries trading with Russia, ostensibly to create pressure for a ceasefire in Ukraine. These would most heavily impact importers of Russian fossil fuels – a category explicitly referenced by Trump when similar measures were first floated in March.
The new tariffs are set to take effect on 1 August 2025, though details regarding the scope, implementation and timelines remain unclear, and negotiations are ongoing. The possibility of further escalation – or de-escalation – cannot be ruled out. For business leaders, this kind of deep and persistent uncertainty translates directly into operational risks.
Core vulnerability lies not only in tariff exposure but in structural interdependencies
Over decades of globalisation, many companies and economies have concentrated production and sourcing in ways that are not easily unwound. Consider the automotive industry, where Mexico, Japan and South Korea are the top three exporters of motor vehicles to the US:
- Mexico relies on complex cross-border supply chains underpinned by high US value-added input. In 2024, 86% of electric motors and generators used in Mexico – key components in vehicle manufacturing – were imported from the US. At the same time, Mexico exports more motor vehicles and parts to the US than it produces domestically, with exports reaching 134.8% of its own production – a figure that reflects re-exports and just-in-time integration with US supply chains. Tariffs would cause disruptions with ripple effects for both economies.
- Japan and South Korea face similarly entrenched dependencies. In 2024, 33.6% of Japan’s and 42.1% of South Korea’s motor vehicles and parts output was destined for the US, underscoring both countries’ reliance on North American demand. However, beyond these headline figures, the deeper vulnerability lies in the integrated manufacturing ecosystems that automakers like Toyota and Hyundai have developed, with critical components moving seamlessly across borders between the US, Mexico and Canada, reflecting decades of supply chain optimisation for cost and efficiency, rather than resilience.
Together, Mexico, Japan and South Korea accounted for 61.3% of US imports of motor vehicles and parts in 2024
Source: Euromonitor International
These are not easily rerouted supply lines, as they represent embedded infrastructure, regulatory alignment and capital investment. Even when alternative suppliers exist, reconfiguring these flows incurs considerable costs, delays and quality risks. Any disruption would have significant knock-on effects not just for manufacturers, but also for downstream sectors, such as logistics, retail and repair. For US consumers, the result could be higher car prices and longer wait times. Domestic automakers might see a short-term boost in market share from reduced competition, but even they are unlikely to remain untouched, given the extent to which US-based production depends on global suppliers and cross-border parts flows. The entire system is deeply interconnected.
The task at hand for business leaders
In this environment, the task at hand is less about predicting the next tariff announcement, but more about planning for a range of scenarios, and building resilience and readiness in the face of ongoing volatility. That begins with a clear understanding of how the business is exposed across trade flows, measuring the potential impact of different tariff rates, and assessing the feasibility of supplier or market diversification.
Tools like Euromonitor’s Tariffs and Trade Dashboard can support informed decision-making across industries by helping business leaders quantify tariff exposure, model impact scenarios and evaluate diversification options. For example, automotive manufacturers and supply chain leaders can use the dashboard to assess, in real time, the potential impact of different tariff rates on US imports of motor vehicles and parts from Mexico, Japan, South Korea and other key trade partners.
Stream our webinar, The Business of Uncertainty, to understand the impact of Trump policies across industries.