GM, Ford And Stellantis Reviewing Their Supply Chains With Trump Tariffs

As U.S. President Donald Trump continues to raise, lower, and temporarily suspend tariffs on importation of goods from Canada, Mexico, and elsewhere in the world as an apparent negotiation tool, GM and the other Big Three automakers – Ford and Stellantis – are reviewing their supply chains for way to mitigate or avoid future tariff effects on their U.S. business.

As reported by Crain’s Detroit Business, GM and its major American rivals are making the most of a one-month pause in automotive sector tariffs to scrutinize components supplied by Canadian and Mexican plants and take steps to dodge the worst impact of potentially soaring duties.

Since 2020, automotive components imported to the U.S. to GM and other automakers from north or south of the border have been subject to the rules of the USMCA agreement rather than the previous NAFTA framework. Per the USMCA rules parts that are made 75 percent in North America by workers earning $16 per hour or more can be imported freely, without any duty. Those components not meeting these and several other restrictions were previously subject to a 2.5-percent to 6-percent duty. Now, however, they will be subject to a 25 percent tariff if they do not meet the USMCA requirements.

Federal statistics indicate 38 percent of Canadian auto parts imports are USMCA compliant while roughly 50 percent of those from Mexico meet the standards. This means that half of Mexican imports and 62 percent of Canadian imports could see an increase in duties from 2.5 percent to 25 percent once Trump’s tariffs go into effect. An automotive attorney who specializes in helping companies navigate import requirements, Mitchell Zajac, says that “there’s an equation where you can build in 5 percent or 2.5 percent duty into your margins or into your cost, but the supply chain and automotive industry doesn’t carry 25-percent margins.” In a notable bit of understatement, he added “that hit is significant.”

Prior to the current situation, according to Crain’s, GM and other automakers usually preferred to get components from low-wage suppliers and simply absorbed the 2.5-percent or so duty that was the penalty for doing so. The 25-percent tariff will make ignoring USMCA requirements considerably more painful for these companies. This is particularly true since many suppliers buy from other suppliers, making the potential chain of tariffs and compliance issues even more Byzantine and complex.

Echoing experts who said that the tariffs will not return automotive jobs to the U.S., there are no efforts under way by GM, Ford, Stellantis, or their suppliers to actually shift component production to the United States. Such a process would take years and the costs involved are prohibitive given the uncertainty of the situation. Instead, the car companies are using the one-month tariff pause to build up reserves of parts and seek out alternate suppliers who may better comply with USMCA.

GM and the other Big Three are largely taking a wait and see attitude because “making decisions in this environment would be rash and could cost you even more money,” as trade group MichAuto director Glenn Stevens points out.