The Trump administration’s on-again, off-again tariffs are affecting the auto industry harder than other sectors, a supply chain expert said in an interview.
“Automotive is ground zero,” said John Lash, group vice president of product strategy at software company e2open. “It is the industry that will be the most affected.”
President Donald Trump on Feb. 1 implemented tariffs of 25% on goods from Canada and Mexico. The tariffs were then paused. This month, they were on again. Then they were paused again in response to pleas from automakers.
Tariffs are levied as goods are imported. They are not payouts from one country to another. Typically, importing companies pass along the cost of the tariffs to their customers.
All of this “destroys business models that have been honed over the decades,” Lash said.
Since free trade agreements in the 1990s, automakers and suppliers developed supply chains where parts and vehicles cross North American borders repeatedly. The first trade agreement, the North American Free Trade Agreement, was updated during Trump’s first term with the United States-Mexico-Canada Agreement in 2020.
Companies have “taken full advantage” of such trade pacts, Lash said.
Lash speaks from experience. He’s from Canada and has crossed back and forth between the U.S.-Canada border for business.
Automakers including General Motors Co., Ford Motor Co., Stellantis, Toyota Motor Corp. and Honda Motor Co. have plants on both sides of the U.S.-Canada border. The suppliers of those automakers have their own cross-border investments.
“Nobody anticipated this,” Lash added, referring to Trump’s tariff moves of his second term as president.
“You can undo” the existing supply chains “but it will take years if not decades to unwind them,” the executive said. The cost: “hundreds of millions of millions of dollars.” A single vehicle-assembly plant can cost $1 billion.
Automakers and suppliers “need certainty” before making future investments, he added.
“If you’re one of the CEOs of one of these companies” they need to how “to decide what to investment in,” Lash said.
“If you’re a CEO, it’s too risky to make an investment.”
Lash said tariffs “will raise the cost of manufacturing…It’s going to impact all of us.”
“It’s risky to do anything else,” Lash said. “They have to sit on the sidelines.”