Trump's China tariffs shake Shanghai auto show as smart EVs face crackdown

Trump's tariffs and China’s AI driving restrictions unsettle automakers at the Shanghai auto show.

A humanoid robot and flying car are displayed at the Chery Auto booth during the 21st Shanghai International Automobile Industry Exhibition (Auto Shanghai 2025) at the National Exhibition and Convention Center in Shanghai, China, on April 23, 2025. Photo by Ji Haixin/VCG

By Anna Fadiah and Hayu Andini

China’s premier automotive exhibition, the Shanghai auto show, opened on Wednesday under the cloud of global economic uncertainty and rising trade tensions. Once a celebratory showcase of the nation’s booming electric vehicle (EV) industry, this year’s show has become a stage for mounting concerns as Trump China tariffs and Beijing’s regulatory crackdown on driver-assistance technology weigh heavily on both domestic and foreign automakers.

As about 70 manufacturers rolled out over 100 new models into a fiercely competitive market, industry executives were focused less on celebration and more on damage control. The Trump China tariffs, which include a hefty 145% tax on Chinese vehicle imports to the United States, are expected to ripple across global supply chains. At the same time, China’s surprise ban on promotional language around smart driving and autonomous driving has forced a sudden shift in marketing narratives just as automakers were leaning into artificial intelligence to set themselves apart.

Crackdown on smart-driving tech follows fatal crash

Regulators have ordered automakers to stop using terms like autonomous driving and smart driving in their marketing following a high-profile accident in March involving the Xiaomi SU7—a popular EV equipped with a driver-assistance system. The fatal crash led to public outcry and government intervention aimed at curbing what officials called “overhyped” claims about automated driving capabilities.

In response, Chinese EV firms pivoted quickly. Xpeng, known for its AI-driven systems, announced the launch of a driver training initiative that focuses on safe operation within the limits of the technology.

“We will emphasise the capability boundaries of the driving-assistance functions to ensure safety,” said Xpeng CEO He Xiaopeng, underscoring a new industry-wide message of caution.

Even BYD, a leader in EV innovation, omitted references to its much-touted “God’s Eye” system during the show’s press events. The company focused instead on the unveiling of new models like the budget-friendly Seal 06 and Sealion 06, as well as luxury entries meant to compete with high-end Western brands.

Trump China tariffs threaten global automakers' strategy

The impact of Trump’s China tariffs is reverberating well beyond the showroom floor. U.S. auto groups have urged the White House to roll back the 25% import tax on auto parts, warning that escalating costs could depress sales and trigger job losses.

“Trump’s China tariffs are not only punishing Chinese automakers,” said one industry analyst. “They’re also hitting American car buyers and complicating global supply chains.”

For companies like Nissan, the consequences are immediate. Once planning to export up to 200,000 vehicles annually from its Chinese factories, the Japanese automaker now finds itself unable to send those vehicles to the U.S., a key market.

“I don't know how bad it will get. I don't know how extreme some people or some governments will get,” said Stephen Ma, Nissan’s China chief. “Even though I’ve lived and worked in the U.S. for a long time, I could not have anticipated this.”

Even Tesla, whose CEO Elon Musk is a known Trump ally, has been forced to suspend orders for the Model S and Model X in China due to retaliatory tariffs. The EV giant has also paused some imports of China-sourced components, further illustrating the complex fallout of the U.S.-China trade war.

Sales strong but fragility looms

Despite the storm clouds, China’s auto market remains surprisingly resilient—for now. Sales in the first quarter of 2025 were up 12.5% year-over-year, led by domestic giants BYD and Geely. However, analysts caution that continued political volatility or economic slowdown could trigger a steep decline in demand.

Chinese vehicles are already largely locked out of the American market due to earlier rounds of tariffs. Now, there are growing concerns that Washington may pressure its allies in Europe and elsewhere to enact similar restrictions.

“Trump China tariffs are just the tip of the iceberg,” said Yale Zhang of Automotive Foresight. “If other countries follow the U.S. lead, Chinese automakers could be boxed in.”

Western automakers try to catch up

Foreign brands find themselves increasingly outpaced by domestic competitors who offer high-tech features at a fraction of the price. General Motors, through its Cadillac division, revealed a fully electric lineup—Lyriq, Optiq, Vistiq, and Escalade IQ—clearly signaling its ambition to re-enter the Chinese EV race.

“This shows that GM sees Cadillac as its best bet to get back into China in a big way,” said Tu Le, founder of Sino Auto Insights. “But GM will have to sell Cadillacs in China for less than in the United States.”

Volkswagen, once dominant in China, reported a 6% drop in first-quarter sales. The German automaker introduced five new VW and Audi models under a new branding theme: “CHINA SPEED.” Meanwhile, GM’s Buick brand is trimming its offerings to focus only on profitable models—a reflection of how brutally competitive the market has become.

“The alarming thing at this show is the enormous amount of technology and content that’s being given to customers at such a low price,” said Matt Noone, Buick’s design executive. “How do you make money on that? Are you making money on that?”

The future of ‘smartification’ and the role of safety

While the EV revolution was the first phase of China’s auto market transformation, many believe the next frontier lies in smartification—integrating artificial intelligence and connectivity into everyday vehicles. But with Beijing’s new restrictions on marketing such technologies, automakers must strike a careful balance between innovation and regulatory compliance.

He Xiaopeng acknowledged that full self-driving vehicles may still be more than a decade away due to legal, ethical, and technical barriers. His company, like others, is shifting its messaging to emphasize safety and practical use cases.

Andrew Fellows, global head of automotive at consultancy Star, criticized Western carmakers for falling behind.

“The Western carmakers slept their way through the pandemic while the Chinese rode the EV revolution,” he said. “They’re going to find it hard to dislodge the local carmakers.”

A reshaped battlefield

The 2025 Shanghai auto show was supposed to be a triumph for Chinese automakers, many of whom now rival or surpass their Western counterparts in affordability, innovation, and speed to market. But Trump China tariffs and Beijing’s abrupt rule changes have shifted the mood from confident to cautious.

As global automakers navigate this volatile landscape, the message from Shanghai is clear: the road ahead will be as treacherous as it is transformative. Whether it’s trade policy or technology regulation, no player in the automotive world can afford to ignore the shifting dynamics that now define the global car industry.