Six trade groups representing automakers and the aftermarket have written to the Departments of the Treasury and Commerce asking that regulations to implement President Donald Trump’s 25% tariff on imported automotive parts allow them more time to reroute supply chains.

A 25% tariff on assembled vehicles imported into the U.S. went into effect on April 3, and a 25% tariff on some parts is set to begin May 3.

“As you know, existing automotive supply chains are global and complex. They are also exceedingly fragile,” the April 21 letter states. “Tariffs on auto parts will scramble the global automotive supply chain and set off a domino effect that will lead to higher auto prices for consumers, lower sales at dealerships, and will make servicing and repairing vehicles both more expensive and less predictable. Most auto suppliers are not capitalized for an abrupt tariff-induced disruption. Many are already in distress and will face production stoppages, layoffs, and bankruptcy.”

The groups that sent the letter are the Alliance for Automotive Innovation, American Automakers AAPC, American International Automobile Dealers Association (AIADA), Autos Drive America, Motor & Equipment Manufacturers Association (MEMA), and the National Automotive Dealers Association (NADA). Their letter is also addressed to U.S. Trade Representative Jamieson Greer.

According to the Associated Press, Trump has said tariffs were meant to raise money for the Treasury, bring manufacturing back to the United States, protect domestic industries, and get other countries to make concessions.

The letter notes Trump’s “openness” to reconsidering the tariff on auto parts, similar to the recent tariff relief approved for consumer electronics and semiconductors. The AP reports that Trump said electronics would be “excluded from broader so-called reciprocal tariffs, a move that could help keep the prices down for phones and other consumer products that aren’t usually made in the U.S.”

The automotive and aftermarket trade groups say similar action regarding the auto parts tariff “would be a positive development and welcome relief.”

“Most auto suppliers are not capitalized for an abrupt tariff-induced disruption,” the letter states. “Many are already in distress and will face production stoppages, layoffs, and bankruptcy. It only takes the failure of one supplier to lead to a shutdown of an automaker’s production line.

“When this happens, as it did during the pandemic, all suppliers are impacted, and workers will lose their jobs. We support more manufacturing and additional supply chains that run through the United States, but it is not possible to reroute global supply chains overnight or even in months. This will take time.”

The letter also notes research from the Center for Automotive Research (CAR) that estimates the uniform 25% tariff on all trading partners will impact more than 17 million vehicles, including 6.8 million of the Detroit 3’s, i.e, General Motors, Ford, and Stellantis.

“All vehicles — whether produced or sold in the U.S. — would be affected by the 25% tariffs, as no vehicles are built with 100% U.S. domestic content,” CAR wrote in its report. “As a result, all automakers operating in the U.S. would face increased costs due to tariffs on both imported parts used in domestic production and on imported vehicles. The Detroit Three automakers would bear greater overall cost increases from tariffs on imported parts, affecting domestic vehicle production, than from tariffs on their imported vehicles.”

All U.S. automakers would see increased costs of $107.7 billion, including $41.9 billion to the Detroit 3, according to the report.

“The modern automotive supply chain is both global and complex, convoluting the seemingly simple question of the cost of 25% tariffs on the industry,” said K. Venkatesh Prasad, CAR senior vice president of research and chief innovation officer, in the report. “Automakers and their suppliers are often multinational companies with facilities spread out across the world, making it difficult to discern how much of a vehicle is domestically produced.”

In a separate April 21 letter addressed to Trump, Mike Spagnola, Specialty Equipment Market Association (SEMA) president and CEO, asked the administration to support domestic automotive parts manufacturers during their ongoing transition to re-shore manufacturing.

“That relief could include tariff exemptions for things like molds, tooling, and machinery brought back to the U.S., as well as tax incentives to offset the associated costs,” Spagnola wrote. “Because of their smaller margins and need to pay upfront for goods and services, small and medium-sized businesses are among the hardest hit by tariffs. The tariffs are exacerbating cash flow issues, delaying payments, and reducing capacity/inventory. Perhaps the greatest barrier they face is sudden, unpredictable changes to their supply chains.”

Spagnola noted that the transition is expected to take at least 18 months.

He also wrote that SEMA members are now purchasing domestic steel and aluminum at higher rates due to the tariffs because domestic producers “have used the tariffs on their foreign competitors as a way to raise their own prices.”

“Industry businesses are fearful of the uncertainty they are creating for their customers, businesses, and employees; the tariffs’ impact on their sales; and their ability to maintain their workforce at previous levels,” Spagnola wrote. “Some companies have already started to lay off American workers, while others have shared plans to do so without policy changes or significant relief.”

During a webinar last week, Ryan Mandel, Mitchell International’s auto physical damage solutions claims performance director, said new tariffs on assembled vehicles and some automotive parts are expected to disrupt supply chains and increase repair costs, but likely not until mid- to late summer.

Mandell also said parts supply chain issues similar to those that occurred during the COVID-19 pandemic could happen again because of OEM production and importation reductions, potentially resulting in longer-term impacts over the coming years due to changes in manufacturing locations.

Images

Featured image credit: Douglas Rissing/iStock