This story has been updated with new data and commentary from Cox Automotive.
It’s tough to score a bullseye on a moving target, but that’s what manufacturers are attempting to do as Pres. Donald Trump continues to toy with the rate of tariffs on imported goods since first announcing them last spring.
“We estimate that government will collect $100 billion on auto and parts imports that has implications that have not materialized yet in what we have been seeing in the auto market,” said Cox Automotive chief economist Jonathan Smoke, during a webcast Thursday. “Manufacturers are playing a complex, multi level chess game in the dark on a tilted table.”
The table keeps tilting and the target keeps moving.
As late as September 5, Trump issued an executive order once again “modifying” the scope of reciprocal tariffs he originally announced on April 2.
“Tariffs have evolved from a temporary disruption to a structural reality. We’ve seen multiple rounds of increases, reciprocal actions and shifting exemptions,” declared Erin Keating, executive analyst at Cox Automotive, during the online briefing. “The repeated changes in tariff rates are making both short and long-range planning more challenging for automakers and suppliers for which key decisions must be made as long as years in advance.”
That’s what was on the minds of industry executives and legal experts who advise companies in the auto sector and closely follow issues related to it at the MOVE America mobility conference in Detroit this week.
Indeed, uncertainty is the antithesis to predictability automakers and supplier require for product and financial planning, pointed out Robert Riley, chief value partner at Honigman LLP, a national business law firm with offices in Michigan.
But those days are gone, he said so companies are “getting comfortable being uncomfortable.”
“That means tradeoffs, that means supply chain adjustments, that means capital expenditure adjustments and sometimes deferments, that means changing customer behavior,” Riley pointed out in an interview on the MOVE conference’s sidelines. “All of those things are happening at once, and they can only predict so much, and they can only get so much information out of the current administration that’s going to help them plan for tomorrow, next week, next month, next year.”
The results, Riley asserted, include deferring some long-term capital investments, extending a vehicle’s normal seven to nine year lifecycle to perhaps 10 or 12 years due to the upfront dollars needed to replace or refresh a vehicle.
“You’re seeing that with launches delayed or deferred or some programs canceled entirely, especially on the electric side,” Riley pointed out.
To successfully bounce along the waves of policy changes suppliers are asking their customers for greater transparency on contingency plans, offered Seth Drucker, vice president, general counsel, North and South America, at auto supplier Valeo, during a panel discussion.
“The auto industry, typically, for the last 25, 30 years, has been a just in time business, and now you’re seeing just in time or just in case, and you have requirements that you have a 30 or 45 day, or sometimes a one year stock of certain critical components where there’s a geopolitical risk that there may be an issue getting those, and you can’t just turn around and buy them from someone else the next day,” said Drucker. “It’s required more trust, a little bit more data sharing that I think everybody might have been comfortable doing in the past.”
Drucker went on to advise all links in the supply chain must communicate with each other as to production, spending and contingency plans to make sure the companies all their “ducks in a row” in order to be agile enough to react sensibly in the event tariff rates change again.
One contingency often discussed to avoid paying levies on imported parts, components or entire vehicles is producing those products in the U.S.
Indeed, Amit Sharma, vice president, and deputy general counsel at seating supplier Lear said a consideration is “onshoring” production “a much as possible.”
Easier said than done, points out Riley, given long lead times and especially the cost and time required to build new factories.
“These companies have invested billions of dollars, tens of billions of dollars, to build a supply chain that’s international in an effort to produce not just the highest quality vehicles, but at the most effective costs,” said Riley. “They’ve got to run a business, and you can’t turn that upside down in response to a particular administration’s regulations and expect to see immediate returns. So no, the short term, you just can’t pull the switch.”
When Pres. Trump first announced the import tariffs, it set off a gold rush to dealer lots by consumers looking to scoop up “pre-tariff” vehicles before prices were expected to soar once cars and trucks subject to the levies arrived.
But in most cases automakers didn’t raise their prices once the tariffs were imposed, preferring to absorb the costs rather than turn off customers.
That may be good customer relations, but not long-term.
“It’s unsustainable,” Riley declared. “If their costs are going up 10,15, 25% or more depending on where parts are coming from, that’s unsustainable. The margins in the automotive industry aren’t 25 or 30 or 40 or 50% so that’s just not sustainable in the long run.”
The bargain party is already breaking up. In August, the average transaction price for a new vehicle increased to $49,077 from $48,841 as more 2026 model year vehicles arrived and automakers sought to offset higher costs, according to a Kelley Blue Book report issued on September 11.
The price pain from import tariffs is likely to grow as the levies are expected to become a permanent fixture, asserts Smoke.
As Honigman partner Chauncey Mayfield pointed out in the panel, “tariffs always existed.” The trick is understanding how to act when they change and how your products fit in with existing trade agreements.
For sure, Valeo’s Drucker insists constant conversation between manufacturer and supplier is key to “being able to model very quickly the impact of a tariff that might be announced in a tweet or an executive order, so that you can understand what you need to do in the next three or four days, not the next three or four months or a year.”
It’s a hell of a moving target.
TTAC Creator Ed Garsten hosts ” Tales from the Beat,” a podcast about the automotive and media worlds. A veteran reporter and public relations operative, Garsten worked for CNN, The Associated Press, The Detroit News, Chrysler’s PR department and Franco Public Relations. He is currently a senior contributor for Forbes.
The TTAC Creators Series tells stories and amplifies creators from all corners of the car world, including culture, dealerships, collections, modified builds and more.
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