Update on U.S. Section 232 Tariff Adjustments: A Positive Development for Medium-to-Large Transformer Exports

1. On April 2, President Trump signed a White House proclamation implementing reforms to the Section 232 tariff rates. The specific details of these amendments have been previously tracked. Regarding transformers, the most favorable changes in this round of adjustments apply to three specific product categories: "liquid-immersed transformers with a capacity of 10 MVA or more," "other transformers with a capacity of 500 kVA or more," and "transformer parts other than cores and windings." A detailed analysis follows below:

2. For exports of the aforementioned products to the United States, the applicable tariffs now consist of the following components:

1) Base Tariff: 2.4%; the method of application has shifted from being "stacked" (additive) to "non-stacked" (non-additive)—effective through 2027.

2) Section 301 Tariff: 25%; remains unchanged.

3) Section 232 Tariff: The basis for calculation has shifted from 50% of the value of the metal components to 15% of the total value of the product—effective through 2027.

Given that the value of metal components (such as silicon steel, copper wire, etc.) typically accounts for over 50% of a transformer's total value, a potential loophole may have existed in the past (whereby the declared value of the metal components was understated to evade taxes—which serves as the rationale behind the current proclamation's reform to base all tariff calculations on the total product value). Consequently, it is estimated that the overall tariff burden on medium-to-large transformers exported from China to the U.S. will decrease by approximately 5 to 10 percentage points.

3. Therefore, this amendment enhances the cost-performance advantage of medium-to-large transformers from China. Furthermore, the official document explicitly states that these preferential tariff rates for transformers are intended to accelerate large-scale industrial infrastructure development within the United States, thereby reflecting the current robust market conditions and supply shortages for medium-to-large transformers across North America. We continue to maintain a strong focus on the transformer export sector.