China Automotive Systems Inc

ITEM 1A. RISK FACTORS.

In addition to other information set forth in this report, readers should carefully consider the factors discussed in Part I, Item 1A. Risk Factors of our 2024 Annual Report on Form 10-K, as updated and supplemented below. Any of the risk factors disclosed in our reports could materially affect our business, financial condition or future results. The risks described here and , in our 2024 Annual Report on Form 10-K are not tnd in our Quarterly Report on Form 10-Q for the first quarter of 2025, are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, results of operations and/or financial condition. The discussion of the risk factor below updates the corresponding disclosure under Changes in political, business, economic and trade relations between the United States and China may have a material adverse impact on our business, results of operations and financial condition in the 2024 Annual Report on Form 10-K and may contain material changes to the corresponding risk factor discussion in ouour 2024 Annual Report on Form 10-K.

, Changes in geopolitical, business and economic conditions, domestic and foreign trade policies, monetary policies and other factors beyond our control may adversely impact our business, results of operations and financial condition.

Our operations and performance are significant in our Quarterly impacted by global, U.S., China and regional geopolitical, business Report on Form 10-Q for the first quarter of 2025, and economicmay conditions. The global macroeconomic environment continutain material changes to bthe challengorresponding due to the effects of inflatrisk factor discussion, instability in glob therein.

International credit markettrade policies, uncertainty regarding global central bank monetary policy, instability in tsuch as tariffs and sanctions, could adversely affect our financial performance.

Due to the geopolitical environment in many partsinterconnectedness of the world, current eglobal economicy, policy challenges in one area of the U.S. and China,world can have and other factors. P immediate and materiods of diplomatic or armed conflict, such asal adverse impact on markets around the ongoing conflict in Ukraine, tensworld. Changes in internations in the Middle East and China-Taiwan relations, may result in (i) new and rapidly evolving sanctions and tradeal trade policies, including (i) changes to existing trade agreements; (ii) greater restrictions, which may impair on free trade with sanctioned individualsgenerally; and countries, and (ii) negative impacts to global and regional trade ecosystems among our i) significant increases in customers, suppliers,s duties and us. Non-compliance with sanctions, as well as general ecosystem disruptions, could result in reputational harm, operational delays, monetary fines, lost revenues, increased costs, lost export privileges or criminal sanctions.

Ttariffs imposed by any country, including those already imposed or to be imposed by the U.S. governmentand recentltaliatory announced changes to its trade policid other actions by other countries, including increasing tariffs on imports, in some cases significantly,can adversely affect our financial condition and potentially negotiatioperating or terminating existing trade agreements. Some of theresults.

Since his inauguration in January 2025, U.S. President Donald J. Trump has announced various tariffs apply to exports of our component parts and finished products to the U.S. from China, which could significantly increase our sales prices to American cthat impact industries around the world, including the automotive industomers. In fiscal year 2024, our export salry. The complexity arises to the U.S. were about $108 million, constitutfrom multiple overlapping tariffs, including 16.6% of our total sales. The adoption and expansthe most-favored-nation (MFN) tariffs that apply broadly, the Section of301 tariffs, quotas and embargoes, sanctions, that seek to tackle what the occurrence of aU.S. deems are Chinas unfair trade war, or opractices, ther governmental action  fentanyl-related to tariffs or trade agreements or poladdressing illicies, hast drug trade, and the potential to adversely impact our salesSection 232 tariffs which are related to American customers, our costs, our suppliers and national security concerns (mainly on steel, aluminum, and automobiles).

As of the world economy in general, which in turn could have a materidate of this Report, the total adverse effect ontariffs for our business, resulproducts of operations and financial condition.

The current tariff environment is dynamic and uncertain, as Chinese-made steering gears exported to the U.S. government has imay be 72.5%, composed, modified and paused  of MFN tariffs multiple times since the beginningof 2.5%, Section 301 tariffs of 25%, fentanyl-related tariffs of 2025. Changes to % and Section 232 tariffs and oof 25%. As ther trade restrictions can be announced at any time U.S. is still negotiating with little or no notice. We cannot predict with certaintyChina on the applicable tariff rates, the future trade policy of the United States or otariffs that could adversely impact our business may change in ther countries. We are future.

Our currently evaluating t tariffs include:

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The potentiactual impact of the imposition of se tariffs on our business and , financial condition. However, the  and resultimate impas of operations is subject of any announced or future tariffs will depend on many factorsto a number of factors that are not yet known or are subject to change, including (i) whether  effect such tariffs are ultimately implemented, (ii) may have on consumer demand and global automotive production volumes, the timing aeffective dates and duration of implementation and such tariffs, future changes in the amount, scopes and naturscope of such tariffs and (iii) , the potential exclusions fromwithdrawal of such tariffs in whole or in part, the application of thosescope and effective date of any exemptions to such tariffs.

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A, any moddiificationally, potential tariffs or o to existing exemptions to ther U.S. trade policy measures tariffs, could trigger retaliatory actions by ontermeasures that ther target countries, such as China. For example, may take in response to the recent such tariffs, and the impact such tariffs announced by the U.S. government, on April 12, 2025, China imposed a 125%may have on our customers and our supply chain. We have entered into contractual agreements with our customers to recover some of the tariff on goods importcosts incurred from the U.S. The escalato date and are implementing certain action of trade tes, and consions could impactdering others, to counter the Company in a varietypotential impact of ways, including (i) increases in manufacturingsuch tariffs on our business, financial costs, (ii) disrupnditions or delays to our global supply chain, (iii) limitations on our ability to sell our products abroad, and results of operations, including studying the impact of current trade and tariff policies on the automotive industry and (iv) reevaluating our productions in sales volum footprint and alternatives and gross margins for our in our supply chain. However, we can products, any of whichvide no assurance that we will could negatively affect our business, results of operations and financialntinue to be successful in recovering such condition.

Furthermore, tariffs or osts from our customers or that any of ther trade restrise mitigating actions may lead to will continuing uncertainty e to be successful or will not disrupt and volatility in U.S. deteriorate our business, operations and global financial and economic conditions and commodityperformance.

China presents unique risks to U.S. automotive markets, significant infnufacturers due to the strain in U.S.-China relation,s and ultimately reduced demand for automobilesthe level of integration with akey corresmponding reduced demand for our auto parts products. Also, disrupents in our global supply chain. It remains unclear what additions and volatility inal actions the financialcurrent U.S. administration markets may leady take with respect to adverse changes in trade issues involving China and othe availabilityr countries.

Further, terms he U.S. and cost of capital. Such adother goverse changenments could increampose our costs of capitadditional and limit our access tosanctions or external financing sources to fund acquisitions, capital expenditures,port controls that could restrict us from doing business directly or refinancing of debt maturitiindirectly in or with certain countries on similar termr parties, which could in turn reduce our cash flows aclude affiliates (e.g., China has imposed tariffs and limit our ability to pursue growth opportunities.

taken other retaliatory actions in recent months). The above factors, as well acurrent trade environment could impact the status of other geopolitical, business and economic factors itrade agreements between the U.S., China a S. and elsewothere, could have a material adverse effect on ntries. Any of the above factors could impact our business, resultsupply chain, as well as ofur operations, and fadversely affect our financial condition, includ and operating:

 results.