From CNBC: 2025-03-19 15:14:00

President Donald Trump’s proposed tariffs on goods from Mexico and Canada could impact automotive suppliers more than automakers, leading to ripple effects in the industry. Compliance with the United States-Mexico-Canada Agreement (USMCA) is crucial for avoiding tariffs, but many suppliers are at risk due to lower profits and production disruptions. Stock prices for suppliers like American Axle & Manufacturing Holdings and Magna International have dropped significantly this year.

Data shows that a lower percentage of motor vehicle parts imported from Mexico into the United States in 2024 were compliant with USMCA standards compared to vehicles. In Canada, a larger percentage of motor vehicle parts and vehicles met USMCA standards. Compliance requires 75% of vehicle content to be sourced from the US, Canada, or Mexico, with additional regional sourcing requirements for core parts and materials.

Auto suppliers are concerned about absorbing the costs of tariffs on non-compliant USMCA parts, in addition to existing levies on steel and aluminum. The industry faces challenges from high interest rates, labor shortages, and lower profits, making it difficult to quickly address major policy changes. Suppliers like Magna describe the proposed tariffs as disruptive to the industry. Auto industry veteran Kotagiri emphasized that the issue of tariffs could not be solely addressed by suppliers due to the significant impact discussed. A MEMA survey revealed that 97% of parts makers were concerned about financial distress caused by steel and aluminum tariffs, especially affecting smaller “subtier” suppliers that play a crucial role in the supply chain.

During the pandemic, disruptions caused by smaller part suppliers highlighted their importance in maintaining supply chains. France-based auto supplier Forvia, along with automakers, has been developing contingency plans to mitigate the impact of tariffs. Forvia CEO Martin Fischer expressed concerns about the potential increase in consumer costs if tariffs continue, stating that the industry cannot absorb a 25% tariff.



Read more at CNBC: Suppliers face more dire challenges than automakers amid Trump tariffs