US allies are still eagerly awaiting tariff reductions on autos and steel: Dilemmas and changes under loose trade agreements.

In 2025, the battle between the US and its allies over tariff reductions on autos and steel continued to escalate. Although the US, UK, Japan, South Korea, and other countries have successively reached trade agreements promising to reduce tariff barriers, actual implementation has been mired in a protracted deadlock. Multinational companies continue to bear the heavy burden of high tariffs, policy uncertainty has caused disruptions in global supply chains, and the loose trade agreement model has made delays, disputes, and misunderstandings the new normal in trade relations with the US.

While trade agreements between the US and its allies appear fruitful, they are plagued by implementation loopholes. Take the US-UK agreement, for example. Although both sides announced the elimination of steel and aluminum tariffs and the reduction of auto tariffs from 27.5% to 10%, key provisions remain constrained by a quota system: only 100,000 British cars will enjoy the reduced tariff rate, while the remaining number will still face high tariffs. Japan and South Korea are in an even more awkward position: although Japanese and South Korean automakers have verbally reached a consensus with the US to reduce auto tariffs from 25% to 15%, the actual tariff rate has remained unchanged. Toyota estimates tariff losses of up to $9.5 billion this fiscal year, while South Korea's Hyundai and Kia face approximately $5 billion in additional costs. Soaring corporate costs and squeezed profits are forcing some production capacity to relocate or reduce, putting supply chain stability at risk.

The Trump administration's trade policy has a distinct characteristic: it eschews traditional legally binding agreements in favor of "handshake promises" and unilateral pressure. Its core motivation is to protect domestic manufacturing, particularly core industries like steel and automobiles. By erecting barriers through high tariffs, it pressures allies to increase investment and purchase American products (such as the UK's multi-billion dollar order for Boeing) in exchange for tariff reductions. However, this strategy is fraught with uncertainty: the agreement text lacks legal rigidity, leaving the risk of US reneging. The administrative process is protracted, and the details of the negotiations are unclear, leaving allies in a state of passive waiting. Commerce Secretary Lutnick admitted that the agreement document will take several weeks to finalize and that there will be no "250-page trade agreement"—the streamlined approach blurs the lines between responsibilities and obligations.

Allies are paying a high price for their "tariff dependence" on the United States. The UK steel industry has seen a sharp drop in orders due to the pending 25% tariff, pushing companies to the brink of bankruptcy. The German automotive industry is facing billions of euros in additional costs due to unimplemented tax cuts. Japanese automakers are losing 100 million yen per hour, and South Korean automakers are facing severe profit squeezes. Economic pressure is generating backlash: the EU is considering retaliatory tariffs, and automakers in Germany, Italy, and other countries are pressuring their governments to take action. Australia and Canada, which previously retaliated against the US with steel and aluminum tariffs, have exacerbated their centrifugal tendencies. Allies are anxious not only about the economic losses but also about the unpredictability of US trade policy—whether and when promises will be fulfilled has become a sword of Damocles hanging over their heads.

US tariffs continue to disrupt global supply chains. To mitigate uncertainty, companies are accelerating their "de-Americanization" strategies: Japanese automakers are shifting production capacity to Southeast Asia, South Korean companies are strengthening the resilience of their domestic supply chains, and the EU is promoting regional industrial collaboration. At the same time, allies are seeking multilateral breakthroughs: the UK is deepening its free trade agreement with the EU, and Japan and South Korea are participating in the RCEP framework, aiming to hedge against the risks of US unilateralism through regional cooperation. Although facing a high 35% tariff, China's steel industry is gradually mitigating the impact by optimizing its supply chain (such as processing and re-exporting in Southeast Asia), exploring markets along the Belt and Road Initiative, and upgrading its technology. The resilience of the global industrial chain is being reshaped under external pressure.

The fact that US allies are anxiously awaiting tariff reductions reflects the underlying problems of the loose trade agreement model: a lack of legal constraints, delayed implementation, and vague terms have trapped trade relations in a cycle of "commitment-wait-dispute." This has forced companies to put investment decisions on hold, disrupted market expectations, and squeezed the survival space of small and medium-sized enterprises. More seriously, the US's frequent unilateral actions have undermined the authority of the multilateral trading system, plunging global trade governance into disarray. Allies are gradually realizing that relying on US verbal promises carries far greater risks than benefits, and promoting more stable and predictable multilateral or regional trade frameworks has become an inevitable choice.

The tariff reductions that US allies are still awaiting are not only a game of economic interests but also a microcosm of the transformation of the global trade order. Loose agreements expose the fragility and unsustainability of unilateralism, and the anxiety and countermeasures of allies are giving rise to a new paradigm of cooperation. In the future, global trade is likely to exhibit two major trends: First, regional economic integration will accelerate, with allies reducing their dependence on the United States through multilateral agreements; second, companies will restructure their supply chains to become more diversified and resilient, mitigating the risks of a single market. If the United States cannot balance protectionism with the interests of its allies, its trade credibility will continue to suffer, and its allies will wait and seek independent solutions. This tariff dilemma will ultimately drive deeper changes in the global trade landscape.