Suppliers are scrambling to cope with the compounding nature of President Donald Trump’s tariffs and the speed with which the new levies are coming into effect.

“There are so many tariffs that suppliers are left sort of guessing what the total tariff will be when they get to the border,” said Michael Robinet, vice president of forecast strategy at S&P Global Mobility.

Tariffs on U.S. vehicle imports began April 3, and the Trump administration said duties on a wide range of parts will go into effect by May 3. The auto and parts tariffs follow 25 percent import taxes on steel and aluminum that started March 12.

Goods from most countries are now subject to a 10 percent tariff. Exceptions include China, where levies on most products stand as high as 125 percent, and Canada and Mexico, where goods that don’t comply with North American trade rules face 25 percent tariffs.

Many of the tariffs stack on top of others. Take, for example, semiconductors that an auto manufacturer imports from China.

Those chips could be subject to a 95 percent tariff rate when combining a 50 percent Biden-era levy on Chinese semiconductors, a 20 percent tariff on Chinese goods implemented by Trump in March and a potential 25 percent levy on goods from countries that import Venezuelan oil. (Semiconductors are exempt from the 125 percent reciprocal tariff Trump placed on Chinese goods.)

Semiconductor tariff rates could grow even higher since Trump has promised a duty on all semiconductor imports, though details and timing remain unclear.

Supplier executive ‘especially worried’ about tariffs’ layering effect

That’s just one example of tariff costs for key components stacking on top of each other.

Vehicles from Mexico that don’t comply with North American trade rules are subject to both the 25 percent auto tariff and the 25 percent tariff on Mexican imports. A part imported from Europe could be subject to the auto tariff starting in May and 25 percent steel and aluminum duties.

“I’m especially worried about the layering effect that these tariffs are having,” said an executive at a top supplier, who asked not to be named given the sensitive political nature of the topic.

Depending on their materials, auto components can be subject to the parts tariff for the full transaction value and existing tariffs such as 2018’s 25% steel tariff. However, components subject to the auto parts tariff are not subject to reciprocal tariffs based on country.
Sources: Presidential executive orders and the Harmonized Tariff Schedule of the United States

The potential disruptions from the compounding tariffs could create more uncertainty for auto manufacturers than the COVID pandemic did, said Bill Newman, automotive industry executive adviser at SAP. That’s especially true if levies on auto parts go into effect by May 3 as planned.

”If you know things are going to be positive or if you know they’ll be negative, you can at least plan for that," Newman said. “When there’s uncertainty, you have to choose from multiple scenarios and place a bet on what might happen day by day or hour by hour.”

Trump’s tariffs have quickly transformed trade

The speed with which Trump has reshaped the global trade landscape has left many suppliers reeling. The effective U.S. tariff rate on April 9 was at its highest level since 1909, when the auto industry was in its infancy and well before its vast, interconnected supply chains came to be, according to the Yale Budget Lab research center.

Most of Trump’s tariffs went into effect within days or weeks of him announcing them. The president has cited emergency authorities to move quickly on trade.

The supplier executive said the company was given just three hours’ notice on which products were subject to steel and aluminum derivative duties after those tariffs went into effect.

“We’re used to having 270 days to prepare, not three hours,” the executive said.

The steel and aluminum tariffs are of particular concern for many suppliers. Steel and aluminum imports are subject to the 25 percent tariff, and some auto parts that contain non-U.S. steel or aluminum are, too. Those parts, which include bumpers and lug nuts, will be tariffed at 25 percent of the value of the foreign steel or aluminum in them.

Coming up with that value can be difficult.

“We have the information, but how do we centralize it quickly? We might get this information when a new part comes to us, and then we’ve never needed it before, so we’d forget about it,” the supplier executive said. “But then all of a sudden, we need to connect data that’s 5 years old to current Customs paperwork. There’s no data connection that exists today between those systems.”

Automakers are experiencing something similar with the auto tariff.

Canadian and Mexican vehicles that comply with the United States-Mexico-Canada Agreement are only tariffed on the value of their non-U.S. content. But sorting through the thousands of parts that make up a vehicle and determining where each originated and what it’s worth can be a daunting, time-consuming task.

“Ensuring this is all done properly is a big challenge in and of itself,” said Abhijit Boora, a director in the automotive and industrial practice at AlixPartners.

Border bottlenecks a concern as tariffs pile up

Some companies have also raised concerns about whether the complex nature of these tariffs could cause bottlenecks or slowdowns at the border, especially as more levies go into effect.

“Customs is going to have to give a lot more rulings now and give a lot more USMCA compliance reviews,” said Les Glick, the chair of law firm Butzel’s international trade and customs specialty team.

Customs and Border Protection has long said it’s understaffed and underfunded, Glick said.

“They might get more staff and more money,” he said. “They’re going to need it or else risk slowing things down at the border.”

Suppliers seek relief from automakers

Suppliers say the logistical hurdles and costs are major concerns.

Some automakers are opting to help suppliers address their worries, including Stellantis North America, which said it will cover tariff costs so long as suppliers take measures to mitigate exposure.

The company is considering cost relief on a case-by-case, monthly basis, Automotive News affiliate Crain’s Detroit Business reported.

Tariffs are rolling out so quickly that parts makers must think about the costs in terms of days and might not be able to wait months for relief, the supplier executive said.

“When you’re assessed a tariff on bringing a good in, it’s zero to five to seven days to pay the government for the tariff,” said Stephanie Brinley, the associate director of AutoIntelligence at S&P Global Mobility. “But of course, as a supplier, you’re not getting paid for that good for 60 to 90 days.”

That dynamic, combined with the compounding nature of the tariffs and quickly changing trade landscape, has many automakers and suppliers on edge about the financial health of small parts makers deep in the supply chain.

Executives from Ford Motor Co., General Motors and Stellantis have lobbied the administration to exclude certain low-cost auto parts from the tariffs, according to Bloomberg.

“If we’re a big company that’s struggling, I can only imagine how difficult this is for smaller suppliers,” the supplier executive said.