“If the US started putting tariffs on the imports of cars and car parts, that could cause a reduction of orders from my client, which mainly exports tyres to the US and Europe.”

Trump is sitting on an explosive report from the US Department of Commerce that is understood to recommend tariffs as high as 25 per cent on vehicles and car parts on the grounds that such imports threaten the national security of the United States.

The report was submitted to Trump in mid-February, and he had 90 days to decide whether to launch a new chapter in the trade war. If the US president does follow through with the recommendations, a conflict that had been between two countries would go global, drawing in the European Union, Japan and other car production hubs that the US considers allies.

For the US, attacking car exports would be an effective way of pummelling China, which is at the heart of an elaborate and intricate car industry supply chain. But it would also penalise US companies reliant on Chinese parts such as those supplied by Qingdao Ray, which are often difficult to source at home and find their way into America via third nations.

China does not export many finished cars to the US. According to data from the US Commerce Department’s International Trade Administration, it sold just 51,062 new passenger vehicles to the US last year, worth US$1.3 billion. This was just 0.6 per cent of total imports by volume – fewer than the amount sold by Slovakia, Spain or Sweden.

But China is the second-biggest supplier of car parts to the United States, after Mexico, accounting for 12 per cent of all imports in 2017, according to the US-based Centre for Automotive Research.

The research group warned that “due to the automotive industry’s reliance on complex cross-border supply chains, any new barriers to trade will have a significant impact on the US automotive industry, consumer prices, and US sales, employment, and economic output”.

Many of those Chinese parts suppliers are already feeling the squeeze as they grapple with the 10 per cent duty on exports to the US that Trump imposed on Chinese goods based on another section of US trade law, known as Section 301.

Among those exporters is Chongqing Bona Auto Parts, which sells the full range of car parts to American buyers.

“Of course there is an impact on our exports from the existing US tariffs,” said Rita Xiao, the company’s export manager. “The US market accounts for around 20 per cent of our total exports, and our exports have decreased by around 20 per cent since last October [after the tariffs came in].”

“Our US clients have requested a lower price, 10 per cent off the current price, which sounds impossible to us. For some products, we can lower the price a little bit, but 10 per cent off is impossible,” she added.

“If there are new US tariffs on the global auto industry, there will definitely be further impact on us. US partners and clients from other countries will all ask for a lower price, which is not feasible,” Xiao said.

The tariff burden has not fallen solely on Chinese companies: US businesses are also losing out from the 10 per cent duty added last year and stand to suffer more should Trump follow through on Section 232 duties on the automotive industry.

Kevin Feig is the executive vice-president of Foreign Parts Distributors, a company that employs 105 people and was started by his father in 1972 in Miami, Florida.

Feig mainly imports car parts from China, where he has various offices employing management staff and engineers who work with Chinese factories producing steering and suspension parts.

Feig said that increase was a big deal in an industry which “generally works with very tight margins”.

“We and most other companies in our industry are not in a position to just absorb a 10 per cent cost increase without passing it forward. We were forced fairly quickly to raise our prices to our customers and in turn our customers raised their prices to their customers,” he said.

Although other industries have been able to move sourcing away from China to avoid tariffs, the complexity of the products Foreign Parts Distributors sells makes that more difficult.

“I don’t import towels, so it’s not like I can just say, ‘well the costs went up out of China over 10 per cent, so I’m going to buy my yellow towels from Turkey’,” Feig said.

“I’m dealing first of all with a safety item. If you’re driving 80 miles per hour on the highway, if your control arm fails, you’re in big trouble. The type of product we work with is not something that is very easy just to immediately find alternative sourcing. It takes a great deal of research and vetting.”

“New cars would be collecting dust on dealer lots, and owners of older vehicles – badly in need of service to maintain safe operation – would delay necessary repairs due to the increased cost of replacement parts,” Feig said.

The aim of Trump’s tariffs is ostensibly to stop car companies from producing in or sourcing from China. “Get the damn plants open,” he told a rally in Michigan in March, the latest in a long line of comments directed at large carmakers that manufacture overseas.

But, the tariffs have forced some companies to stop building in the US and buy from China instead.

Brad Kraft, president and CEO of Hopkins Manufacturing, which makes and distributes vehicle accessories like trailer hitches and ice scrapers, said existing and potential tariffs had led him to import more from China.

The company, based in Emporia, Kansas, operates plants in the US, Canada and Mexico, but imports many components from China.

It tried to manufacture ice scrapers in the US using foreign-sourced components but because of the items’ tariff classifications, it has been cheaper to import finished goods from China.

The complex parts supply chain also means that electronic components assembled in its Mexico plant contain enough Chinese-made content to be considered of Chinese origin and therefore subject to a 25 per cent tariff.

“Now we are in a position where we have to move work out of the US and into China and we will have a lower cost position because the finished good is not subject to a tariff,” Kraft said. “I shared that one with my US senator and he had to shake his head.”

Hopkins Manufacturing has a team in Ningbo, Zhejiang province, that does sourcing, quality control, logistics and other work there. Kraft visited in March and noticed “a fair amount of apprehension”.

“Our own suppliers are very concerned because they do not know what will happen,” he said.

During January and February, when China’s industrial production slumped to a decade low, car manufacturing was the worst performer, falling by 5.3 per cent.

Separately, a survey by insurance company Coface found that along with the construction industry, Chinese automotive companies’ invoices are paid later than those in other sectors. Any further pressure on the sector could reverberate throughout the Chinese economy.

“If we look at the national retail value, car sales value is around 10 per cent of that. The car industry is labour-intensive. It impacts a lot of things like taxes and employment,” said Patrick Yuan, a Hong Kong-based automotive analyst with Jefferies, an investment bank.

Still, China remains the biggest car market in the world, and international companies will not abandon a shot at such a lucrative customer base. Many have decided to produce in China for consumption in China, taking advantage of just-in-time manufacturing by having their supply chain cluster nearby.

According to Bill Russo, founder of the Shanghai-based consultancy Automobility, tariffs will just accelerate this trend, putting further pressure on US manufacturing.

“The tariffs are not making companies export vehicles to the market, but increasing investment in the country,” Russo said. “They’ve weakened companies exporting cars from the US to China, including Tesla, Chrysler’s Jeep van, Ford’s Lincoln brand and all of the German [carmakers] who manufacture their SUVs in the southern US.”

Reporting by Finbarr Bermingham (SCMP) in Hong Kong and Adam Behsudi (POLITICO) in Washington, DC.

Additional reporting by Cissy Zhou in Hong Kong and Sidney Leng in Shanghai