Trump’s “Liberation Day” automotive import tariffs disrupt global production, logistics and investment strategies

The latest announcement from US president Donald Trump sees 25% tariffs placed on all vehicle imports from the US, effective immediately, and confirms the 25% tariffs on imports of vehicle parts to the US from next month on 3 May. The list of parts that will be affected includes engines, powertrains and electrical components. 

Vehicles that comply with USMCA trade rules will be exempt temporarily, with importers only having to pay the 25% tariff on the non-US content. 

At the same time, Trump announced a tariff of at least 10% on all imports globally, taking effect on 5 April. However, vehicles, car parts, and steel and aluminium imports already subject to tariffs will not be subject to the additional reciprocal tariffs. 

Individualised reciprocal higher tariffs have also been imposed on imports from countries with which the US has the largest trade deficits, and will come into effect 9 April. If trade partners retaliate, Trump could increase the tariffs further, according to a White House fact sheet.

Of course, the whole automotive supply chain does not only consist of specific automotive parts - further up the supply chain, reciprocal tariffs will also hit tier-n suppliers, which will inevitably affect the automotive industry further down the chain by raising expenses and potentially even making parts and materials more difficult to secure. For example, tariffs of 32% have been announced for imported goods from Taiwan, which makes 38.9% of the world’s share of semiconductors, worth $138 bn in export value. The Trump administration has clarified that semiconductors will be exempt from Taiwan’s reciprocal tariffs - at least for now.

Ahead of Wednesday’s announcement by the White House, carmakers, suppliers and logistics providers had been scrambling to mitigate the effects. There had been a surge in vessel movements as ships were rerouted by OEMs away from the US, and carmakers with vehicles already in transit sought to diversify their manufacturing to increase the use of US-sourced components.

Industry reaction to the tariffs

While the industry comes to terms with what the tariff means for the automotive supply chain, the reaction is overwhelmingly one of concern and uncertainty. OEMs will be forced to absorb new costs or seek alternative sourcing strategies. 

Global supply chain collaboration network Vinturas’ CEO, Ronald Kleijwegt, said supply chains will prioritise trade partners that will be least impacted by protectionist measures, and will likely pivot to alternative manufacturing hubs, moving production closer to demand centres. However, these moves will take time and money. Kleijwegt said companies should approach these moves with caution.

“Businesses can get tied up in red tape in unfamiliar markets, and struggle to keep up with differing cross-border and product compliance regulations,” he said. “This leaves more room for human error, fraud and data breaches, product seizures and lost cargo, should it all go wrong.” To avoid this, he said companies need to share data, insights and risk assessments to collectively strengthen and expand supply networks. ”Those that establish business resilience now will have a distinct advantage in maintaining flexibility, compliance, and efficiency in a rapidly changing global trade landscape,” he added.

Meanwhile, North American OEMs are deep in supply chain planning and risk mitigation, as a Ford spokesperson told Automotive Logistics: “We continue to evaluate the potential impact of tariff actions.”

Of course, the tariffs could also have legal implications within the supply chain. Linda Watson, lawyer representing automotive clients at Clark Hill and chair of Clark Hill’s Automotive and Manufacturing Group, said that with just-in-time delivery, suppliers that are most impacted and do not have the ability to escape the tariffs via exemptions may stop supplying unless their customers absorb the tariffs in advance of shipments. She said: “This may cause some immediate litigation as customers need parts and seek injunctive relief from the courts. Whether they get it or not is yet to be seen.”

Watson added: “This will be an inflection point for the industry as customers decide whether to work with suppliers despite contractual terms and take on the costs to avoid litigation or take on the fight in which there will likely be a mix of results.”

Industry leaders warn of cost hikes, job losses and instability

The American Automotive Policy Council (AAPC), which represents Ford, GM and Stellantis, said the 25% tariff on automotive imports would not only raise vehicle prices in the US, but also disrupt long-term investment cycles and create more uncertainty by weakening supply chain stability and consumer confidence.

The AAPC quoted from a report by American economist Dr Art Laffer, which was released days before Trump’s latest announcement and found that US manufacturers face significant competitive risks in the face of the tariffs, as they would “shrink profit margins and reduce their ability to compete globally, potentially leading to job losses and slower innovation”. 

Governor Matt Blunt, president of the AAPC, said: “Ensuring a fair and predictable trade environment is essential to strengthening the US auto industry, supporting American jobs, and maintaining our country’s global competitiveness. Dr Laffer’s determination that the US industry can thrive with our Canadian and Mexican partners is absolutely correct.”

UK could gain from trade reshuffle if it secures US deal

The Society of Motor Manufacturers and Traders (SMMT) said that while the 10% tariffs announced on UK exports was less than other major economics, it was a “deeply disappointing and potentially damaging measure”. 

Mike Hawes, chief executive of the SMMT said: ”Our new cars were already set to attract a punitive 25% tariff overnight and other automotive products are now set to be impacted immediately. While we hope a deal between the UK and US can still be negotiated, this is yet another challenge to a sector already facing multiple headwinds.”

Hawes’ urge for trade discussions to continue was echoed by Lubbock Fine, a UK accountancy and business advisory firm, that said the tariffs could give the UK an opportunity to transform itself into an offshore manufacturing hub for the European Union – if it can negotiate a US trade deal.

Alex Altman, partner and head of German desk at Lubbock Fine, said: “Helping to build the UK as a key manufacturing hub for German carmakers would give a significant boost to the UK economy.”

Altman added: “The UK has a lot of spare automotive manufacturing capacity after Brexit, which makes leveraging the UK’s special relationship with the US well worth it.”

We will update this story as more information becomes available.