If you are in Governmental Affairs, you might want to read this. To map out what an effective H2 2026 action plan looks like, we utilized the Clock&Cloud platform to run a scenario for "Acme Cars"—a test environment mirroring a globally operating German automotive company. This exact type of structured understanding is really just one prompt away when running our platform. But whether you use Clock&Cloud or not, this will stir some thinking if you operate in the GA field for a European manufacturing company. The likely H2 2026 objective for the GA function of a European manufacturer is to maintain operational flexibility while trade architecture is in transition. You must secure the best available tariff position in the U.S., shape EU industrial policy to protect your supply chain model, and preserve market access in China.
Strategic Context for Government Affairs
Government Affairs operates in an environment where the three most consequential jurisdictions for Acme Cars — the U.S., the EU, and China — are simultaneously reshaping trade rules in ways that interact and compound. The core challenge is that optimizing the GA position in one jurisdiction often creates exposure in another:
- Pledging U.S. manufacturing investment to secure tariff exemptions may invite scrutiny from Beijing, which values Acme Cars' continued China presence
- Supporting EU trade defense measures against Chinese EVs may trigger Chinese retaliatory restrictions on market access or rare earth licensing
- Deepening China JV partnerships to maintain cost competitiveness risks political friction in Washington
The GA function's primary H2 2026 objective is to maintain operational flexibility across all three fronts while the trade architecture is in transition — securing the best available tariff position in the U.S., shaping EU industrial policy to protect Acme Cars' supply chain model, and preserving market access in China without triggering retaliation.
FRONT 1: UNITED STATES
Situational Assessment
The U.S. trade policy environment remains characterized by high volatility and shifting legal foundations. The Supreme Court's April 2026 ruling that IEEPA tariffs were unconstitutional has forced the administration to rebuild its tariff regime under alternative authorities. The administration has stated intent to maintain tariff levels broadly similar to the Turnberry agreement (15% on most EU goods) but through different legal instruments.
Current tariff baseline for Acme Cars: 15% on EU automotive exports to the U.S. under the Turnberry agreement.
Key risk: On May 4, Trump threatened to raise tariffs on EU automobiles back to 25%, accusing the EU of non-compliance with the Turnberry agreement. On May 8, Trump extended the threat deadline to July 4 following a call with von der Leyen.
Policy posture: The administration uses tariff threats as leverage for two objectives simultaneously: (1) pressuring the EU to implement its side of the Turnberry deal and (2) incentivizing manufacturers to commit to U.S. production investments. Companies that pledge U.S. manufacturing can receive tariff exemptions — this is a direct engagement opportunity.
Key analytical insight: It is very unlikely that all Section 232 investigations will result in tariffs, given the approaching midterm elections where the administration must balance trade considerations with political implications. In some cases, the administration is likely to continue pressuring manufacturers to commit to U.S. investments by using the threat of tariffs while offering potential exemptions in exchange for these pledges.
Engagement Priorities
Priority 1: July 4 tariff deadline — URGENT
The July 4 deadline is the single most consequential near-term event for Acme Cars' U.S. market profitability. Trump's May 4 threat to raise auto tariffs to 25% was followed by a week-long extension, suggesting the administration is using the deadline as negotiating leverage rather than signaling a firm policy change.
Recommended actions:
- By end of May: Prepare position paper quantifying Acme Cars' U.S. economic footprint — jobs, investment, supplier base, tax contributions — for use in Washington engagement
- June: Engage USTR and Commerce Department through industry association (VDA and European Automobile Manufacturers' Association/ACEA) and directly. Frame Acme Cars as an employer and investor, not as a foreign exporter
- June: Coordinate with German Embassy in Washington and BDI representation to ensure government-to-government channel reinforces the industry message
- Contingency preparation: Model financial impact of 25% tariff scenario. Identify which U.S. manufacturing investment commitments could be accelerated or announced to create exemption leverage if tariffs escalate
Priority 2: Section 301 investigation — formal participation
The Section 301 investigation covering the EU is the mechanism through which the post-IEEPA tariff regime will be established. This is a legal proceeding with formal public comment periods.
Recommended actions:
- Upon notice publication: File public comments emphasizing Acme Cars' integrated U.S.–EU supply chain, U.S. employment, and the disproportionate impact of automotive tariffs on consumers
- Identify coalition partners: Other EU-headquartered manufacturers with significant U.S. production (particularly from the automotive, industrial manufacturing, and chemicals sectors) for joint submissions
- Track the investigation timeline closely: The administration has indicated accelerated proceedings — final determination could come in H2 2026
The EU Parliament's International Trade Committee has added a sunrise clause and conditionality to EU tariff reductions on U.S. goods, requiring the U.S. to reduce steel and aluminum derivative product tariffs first. This means EU tariff reductions will almost certainly not take effect until the new Section 301 regime is set — creating a "chicken-and-egg" dynamic that GA should understand and communicate to leadership.
Priority 3: Section 232 investigations — semiconductor and critical mineral focus
Multiple Section 232 investigations are running, but semiconductors and critical minerals are the most relevant for Acme Cars. Automotive-grade chips and battery materials are potential targets.
Recommended actions:
- Monitor hearing schedules for semiconductor and critical mineral Section 232 investigations
- Prepare industry impact assessment: Quantify how semiconductor or critical mineral tariffs would affect vehicle production costs and pass-through to consumers
- Engage Congressional automotive caucus members — midterm election dynamics mean Congress may pressure the administration to exempt or moderate automotive-relevant tariffs
- Coordinate with semiconductor industry associations (SIA) given shared interest in limiting chip tariffs
Priority 4: IEEPA refund eligibility
The Supreme Court ruling opens a potential refund process for tariffs paid under IEEPA authority. This is a legal/financial matter but GA should coordinate with Legal.
Recommended action:
- Immediately: Coordinate with Legal and Finance to assess total IEEPA tariffs paid and file for recovery. This is a low-effort, potentially high-return action
FRONT 2: EUROPEAN UNION
Situational Assessment
EU trade policy is tightening on two vectors simultaneously: defensively against China (anti-dumping, anti-subsidy, investment screening) and assertively toward industrial sovereignty ("Made in Europe" content requirements, critical raw material sourcing diversification). Both vectors directly shape Acme Cars' supply chain options.
The EU is structurally squeezed between the U.S. and China — strong dependence on the U.S. for defense and exports, strong dependence on China for critical manufacturing inputs. This limits Brussels' willingness to escalate trade tensions with either. For Acme Cars, this means the EU will likely pursue incremental tightening rather than dramatic confrontation, but the cumulative effect of many small measures is significant.
Bilateral trade outlook: EU–U.S. is stable/mixed with high volatility — the EU faces two Section 301 investigations and tariffs are likely to remain broadly stable, but the change in legal mechanisms creates high uncertainty. EU–China is on a trajectory of moderate deterioration with medium volatility — product-by-product barrier increases are very likely, with China's response dependent on EU actions.
Engagement Priorities
Priority 1: Industrial Accelerator Act / "Made in Europe" content requirements — CRITICAL
The European Commission's proposed Industrial Accelerator Act is the single most consequential EU regulatory development for Acme Cars' supply chain architecture. If enacted with stringent content requirements, it could force restructuring of component sourcing away from Chinese suppliers for vehicles sold in the EU.
Why this matters for Acme Cars specifically: The European supplier association CLEPA estimated a 35% cost disadvantage versus Chinese competitors in September 2025, with 350,000 European automotive supply chain jobs at risk. The Act is partly a response to this — but poorly calibrated content requirements could raise costs for European OEMs without creating viable European supplier alternatives in the near term.
Recommended actions:
- June–July: Engage DG Trade and DG GROW through ACEA to shape content requirement thresholds. Key message: content requirements must be calibrated to the actual timeline for European supplier capacity to scale, not aspirational targets
- Prepare detailed supply chain analysis showing which components currently sourced from China have viable European alternatives and which do not. Share with Commission staff
- Coordinate with other German OEMs (VDA coordination) to present unified position — divergent industry positions weaken the lobbying effort
- Monitor rules-of-origin drafting carefully — the specific percentage thresholds and product classifications will determine whether Acme Cars' EV battery supply chain requires restructuring
- Engage European Parliament rapporteur once committee assignment is made — the Parliament tends to push for stronger content requirements than the Commission
Priority 2: EU steel safeguards — July 2026 implementation
New steel safeguards reducing quotas and increasing out-of-quota tariffs from 25% to 50% are very likely to be approved and enter into force in July 2026.
Recommended actions:
- Immediately: Quantify Acme Cars' steel sourcing exposure to out-of-quota tariff increase. Identify which steel grades and suppliers are affected
- June: If significant exposure exists, engage DG Trade on quota allocation methodology — advocate for quota structures that reflect automotive-grade steel demand patterns
- Coordinate with Procurement: Assess whether supplier contracts need renegotiation to account for tariff pass-through
Priority 3: EU trade defense posture against China — managing retaliation risk
The EU–China trade dispute is on a trajectory of slowly escalating barriers (likely), with the scenario of accelerated escalation now assessed as possible. The EU is the highest-risk jurisdiction for triggering Chinese retaliation that directly affects Acme Cars.
The mechanism: Beijing calibrates retaliation to avoid directly harming German carmakers whose continued China presence Beijing values. Agricultural goods are the primary retaliation vector. But this calibration is not guaranteed to hold — if the EU activates the Anti-Coercion Instrument, expands export controls to align with U.S. restrictions, or member states take significant stances on Taiwan, Beijing's targeting calculus could shift.
Recommended actions:
- Continuous: Monitor EU anti-dumping and anti-subsidy proceedings for sectors where Chinese retaliation could target automotive
- Engage German government (BMWi, Chancellor's Office) to ensure Berlin's voice in EU China policy reflects the automotive sector's specific exposure. The VDA's lobbying ahead of Chancellor Merz's February 2026 Beijing visit demonstrated this channel works
- Prepare retaliation scenario analysis: Map the most likely Chinese retaliatory measures if EU escalates — what would happen to Acme Cars' China operations under each retaliation vector (market access restrictions, rare earth tightening, luxury tax expansion, regulatory harassment)
- Maintain back-channel communications with Chinese trade policy counterparts through industry associations — signaling that Germany's automotive sector is not the driver of EU escalation helps preserve Beijing's interest in avoiding automotive-targeted retaliation
Priority 4: EU FTA diversification — positioning for future market access
The EU is accelerating trade diversification: EU–India FTA signed January 2026, EU–Mexico modernized FTA likely entering force H2 2026, EU–Mercosur provisionally applied from May 1, 2026. Additional negotiations underway with Indonesia, Philippines, Malaysia, Thailand, and CPTPP accession exploratory work.
Recommended actions:
- EU–India FTA: Track ratification timeline. Prepare market entry analysis for when Indian import tariffs (currently 70–100%) begin reducing. Engage DG Trade on automotive-specific tariff schedule priorities during implementation phase
- EU–Mexico FTA: Assess whether reduced technical trade barriers create opportunities for Mexico-based production to serve EU market (relevant given Acme Cars' existing Mexico manufacturing)
- EU–Mercosur: Engage on automotive rules of origin under the provisional agreement. Brazil is a significant potential production hub
FRONT 3: CHINA
Situational Assessment
China presents a uniquely complex GA challenge because Beijing operates across trade, market access, regulatory, and diplomatic channels simultaneously, and uses each as leverage across the others. For Acme Cars, the core tension is:
- Beijing values German automotive presence in China — it provides technology transfer, employment, and diplomatic leverage over Berlin
- But Beijing is systematically disadvantaging Western OEMs — through industrial policy (Made in China 2025 successors), the luxury consumption tax targeting premium German brands, and regulatory opacity that creates operating uncertainty
German automotive market share in China has collapsed by 33% between 2022 and 2025. This is the background against which all GA engagement in Beijing must be understood: Acme Cars' leverage as a valued foreign investor is diminishing as Chinese domestic manufacturers gain market share.
Bilateral trade outlook: EU–China relations face moderate deterioration. China is likely to respond to the EU's increasing trade barriers, with agricultural goods facing the highest retaliation risk. Medium uncertainty exists because Chinese responses are dependent on EU actions, and unlikely Taiwan-related diplomatic flashpoints could further deteriorate relations.
Key Issues for GA Engagement in China
Issue 1: Luxury consumption tax
The tax directly targets premium German brands while exempting domestically manufactured EVs. This is both a market access barrier and a diplomatic leverage instrument — Beijing has used it to constrain German political support for EU tariff escalation.
Recommended actions:
- Engage through German government bilateral channels — the VDA successfully lobbied Chancellor Merz to raise this during his February 2026 Beijing visit. This channel should be maintained and repeated
- Frame the ask precisely: Seek exemption or reduction for locally manufactured vehicles, not blanket removal — Beijing is more likely to grant concessions that reward China-based manufacturing
- Coordinate with other affected German OEMs to present unified ask
Issue 2: Rare earth and battery material export controls
China controls ~91% of global rare earth separation. Export controls escalated through 2025, now covering "internationally made products" containing Chinese-sourced rare earth materials. October 2025 controls cover lithium-ion battery cells, cathode precursors, and production equipment.
Current status: Exports are likely to flow in line with the U.S.–China Busan agreement but remain somewhat constrained as to not allow stockpiling. Military end-use exports are very likely denied. China retains this leverage and can threaten to use it for both trade-related and broader foreign policy objectives.
Recommended actions:
- This is not solely a procurement issue — it is a government relations issue. Beijing's export control decisions are political, not commercial. GA must ensure Acme Cars is seen as a partner whose Chinese operations Beijing has an interest in sustaining
- Engage MOFCOM on licensing requirements for Acme Cars' specific rare earth and battery material needs
- Monitor Taiwan-related political developments closely — China will very likely retaliate against countries that take significant stances on Taiwan, and EU member state positions on Taiwan directly affect rare earth licensing risk for European companies
Issue 3: Market access deterioration
Market access to China is experiencing moderate deterioration driven by both the U.S.–China trade dispute and the EU–China trade dispute. Specific risks include opaque regulatory enforcement, heightened customs inspections, and restrictions on data transfers for connected vehicles.
Recommended actions:
- Maintain regular engagement with Chinese regulatory bodies (SAMR, MIIT) through the European Chamber of Commerce in China and bilateral business councils
- Prepare for escalation contingency: If the EU activates the Anti-Coercion Instrument or significantly expands trade defense measures, Beijing could respond with heightened regulatory pressure on EU companies operating in China. GA should pre-position by identifying which Chinese regulatory proceedings could be accelerated or weaponized
- Data localization compliance: Connected vehicle data regulations are tightening. Engage with MIIT to ensure compliance approach is understood and accepted before enforcement action
CROSS-JURISDICTIONAL RISKS
Cascade Scenario 1: EU escalation triggers Chinese retaliation
Trigger: EU activates Anti-Coercion Instrument or significantly expands anti-dumping/anti-subsidy measures against Chinese manufacturing sectors
Chinese response: Agricultural tariffs (primary), rare earth export control tightening (secondary), heightened regulatory scrutiny of EU companies in China (tertiary)
Impact on Acme Cars: Possible rare earth supply constraints for EV production; possible regulatory harassment in China; possible luxury tax escalation
GA action plan if triggered:
- Immediately engage German government to ensure Berlin pushes for targeted EU measures that avoid triggering broad Chinese retaliation
- Activate Beijing back-channels to signal Acme Cars' commercial alignment with continued China presence
- Coordinate with procurement on rare earth contingency sourcing
Cascade Scenario 2: U.S.–China agreement ruptures
Trigger: Perceptions of non-compliance, non-trade flashpoint (Taiwan, South China Sea), or domestic political shift
Consequence: Trade barriers increase bilaterally; rare earth export controls tighten globally; global supply chain disruption
Impact on Acme Cars: Severe — rare earth and battery material supply for European EV production faces acute shortages; U.S. pressure on EU to align with China restrictions intensifies
GA action plan if triggered:
- Engage USTR on exemption procedures for automotive-critical materials
- Engage Brussels to resist blanket alignment with U.S. export control expansion — advocate for sector-specific European approach
- Accelerate engagement with alternative supply chain jurisdictions (India, Brazil, Indonesia) for critical materials
Cascade Scenario 3: U.S. auto tariffs escalate to 25%
Trigger: July 4 deadline passes without resolution; or Section 301 investigation concludes with higher automotive tariff recommendation
Impact on Acme Cars: Direct hit to profitability in most important single market
GA action plan if triggered:
- Immediately activate U.S. manufacturing investment announcement to create exemption leverage
- Engage USTR on company-specific exclusion process
- Coordinate with other EU OEMs through ACEA for joint response
- Brief executive leadership on timeline to U.S. production capacity that could offset tariff exposure