Impact of Global Trade Barriers on BYD

Abstract

Despite tariffs, firms kept selling in different markets and ordering component parts. Impacted firms either absorbed all the costs of the tariffs or shared the added costs with their customers or their suppliers. Regardless, firms incurred significant costs that made otherwise profitable deals unprofitable.

On Tariff Liberation Day on April 2, 2025, the United States imposed a 10% baseline tariff on imports from all countries beginning April 5, 2025.  Higher tariffs were applied to countries where the United States carried the largest trade deficits. It was impossible for most firms to enter new markets or to find new suppliers given that the tariffs covered most countries.

BYD or Build Your Dreams, the world’s largest manufacturer of electric automobiles, was in a position better than most to navigate what was an impossible situation. It enjoyed lower operating costs and its vehicles offered features its competitors could not match. This made BYD’s electric vehicles more attractive than those of its competitors. BYD produced a wide range of vehicles at the lower and upper end of the market. Unlike most automobile and light truck manufactures, BYD did not sell cars in the United States. Thus, Tariff Liberation Day did not impact BYD.  BYD established production operations outside of China that diversified its supply chains and avoided tariffs and other trade barriers.

It was questionable how long BYD was able to remain competitive given the global trade war and various trade barriers enacted by countries to protect their firms and markets.