China’s auto industry is facing growing headwinds as trade policies in the US, Russia, and elsewhere restrict its access to key overseas markets, forcing domestic manufacturers to look further afield.

President Donald Trump’s decision to impose 25% tariffs on car imports intensifies global competition outside the US and China, the world’s two biggest auto markets.

Though Washington has offered concessions on some imported components, the new levies challenge international automakers, including GM, Toyota, and Hyundai, to compete more aggressively in third markets.

This environment poses a particular challenge for China, where the automotive sector contributes 10% of GDP and 6.5% of total exports, according to Commerzbank economist Tommy Wu. With domestic demand weakening, Chinese carmakers like BYD, Geely, and SAIC have increasingly looked abroad, exporting nearly 6 million vehicles last year.

Yet that strategy is becoming less viable. In Russia—once China’s top export destination—new policies such as a raised recycling fee favour domestic brands. Chinese auto exports to Russia dropped sharply in early 2025, with figures suggesting a steep decline from the previous year.

Trade barriers are also emerging elsewhere. Last October, the EU raised tariffs on Chinese electric vehicles to over 45%. Other countries, including Turkey and Brazil, have taken similar steps.

Only a few markets, such as Australia, Norway, Saudi Arabia, and the UK, remain relatively open. Combined, they represent a limited opportunity of roughly 10 million annual vehicle sales.