President Donald Trump arrives to talk about the American agreement – Mexico – Canada, known as USMCA, during a visit to Dana Incorporated, manufacturer of car suppliers, in Warren, Michigan, January 30, 2020.
Saul Loeb | AFP | Getty images
DETROIT – The prices offered by President Donald Trump on Mexico and Canada’s goods would hit car suppliers harder than car manufacturers, but their problems could quickly have training on the broader industry.
Most vehicles produced in North America meet the requirements of the trade in trees under the agreement of the United States-Mexico-Canada, but much less individual parts meet strict standards under the North American trade agreement of 2020 which was negotiated by Trump, according to federal commercial report data.
The compliance of the USMCA is important for car manufacturers and suppliers. Products that meet standards, which include rules on the place where a part or material can be produced, are currently able to avoid 25% of North American prices until the extended direct debits are provided to take effect on April 2.
Companies are putting pressure on the Trump administration to continue authorizing parts and vehicles that comply with USMCA regulations to stay without a price.
Such prices are additional challenges for a less robust post-avid automobile supply chain which continues to deal with high interest rates, labor shortages and lower profits. There are many more suppliers than car manufacturers, many of whom can only produce a few parts that could cause production disturbances if they are forced to close due to higher costs.
Actions of many larger suppliers contributed on the stock market, such as American Axle & Manufacturing Holdings,, Magna International And Farewellare two figures this year in the middle of the prices. Others like aptiv and Lear Corp. are roughly flat.
Supplier stocks
“There is clearly not the profitability of the supply chain to absorb the prices,” said Collin Shaw, president of the Mema Original Equipment Suppliers Association, in CNBC. “Suppliers are more at risk, seeing a lower supplier percentage does not comply with the USMCA.”
USMCA standards
About 63% of motor vehicle parts imported from Mexico in the United States in 2024 were complained to USMCA standards. This is compared to 92.1% of motor vehicles.
For Canada, 74.6% of motor vehicle parts and 96.9% of vehicles were imported without a price as part of the USMCA in 2024. This includes 170 Canadian parts suppliers that operate installations in 26 states, according to the Automotive Pide Manufacturers’ Association in Canada.
The compliance of vehicles and parts comes from commercial data accessible to the public of the US international trade committee according to the price of imported goods. A small minority of non -compliant goods which did not claim a commercial program such as the USMCA may have been imported without a price if they were sold to the government, were in transit elsewhere or for other reasons.
To comply with the USMCA, 75% of the vehicle content must come from the United States, Canada or Mexico, with additional requirements, such as 40% of the basic parts and 70% of steel and aluminum must come regionally.
“I think that if we get automobile prices that have closed the industry, many interests in our business will find themselves in search of a state of emergency,” said Flavio Volpe, defender of the Canadian automotive industry who directs APMA. “Everyone is nervous.”
Shaw, whose organization represents more than 800 car suppliers in North America, said that the supply chain is “resilient”, but there is also a “fragility” which makes the changes in politics difficult to approach quickly.
“What I would say is very difficult, it is the whip saw in both directions,” said Shaw. “The idea that we can very easily bring these things back – it can be done. It takes time, however.”
A production worker inspects parts for any quality problem at ALUDYNE ALUDYNE in Port Huron, Michigan, United States, October 7, 2020.
Alydyne | Rachael Waynick | Reuters
In general, Shaw said he can take years to move a factory and build a new one. Allowing a new factory can take six to 12 months. It can take another 12 months to 18 months, if not more, to build the installation, followed by another year or more in the tools and production of production.
The parts that are produced for a vehicle have an impact if a full car or truck is in accordance with, but many major parts such as motors and transmissions are assembled locally, helping compliance for the finished product. The same goes for parts such as wire harness, batteries and other smaller components.
For example, BMW said its vehicles produced in Mexico does not comply with USMCA, largely because vehicle engines are imported from Europe. Motors and transmissions tend to cross borders less often than part that went in one of these main components.
“This is a complicated agreement,” said Kristin Dziczek, Automobile Policy Advisor for the Federal Reserve Bank in Chicago, at his annual car conference last month in Detroit. “There are therefore different categories here of components and parts and vehicles and various thresholds of what they had to say to have the supply of the USMCA in order to obtain a zero price for trade in the United States”
Since Trump’s USMCA entered into force and replaced the North American free trade agreement in 2020, compliance for motor vehicles and Mexico parts has decreased, which means that more prices are probably paid. Right -free vehicles dropped from 99.7% in 2019 to 92.1% in 2024, while vehicle parts are down approximately 75% in 2019 to 62.5% in 2024.
Motor vehicle vehicles in accordance with Canada free trade increased from 83.1% in 2019 to around 75% in 2024. Imports of vehicles without tariffs from Canada are slightly dropped from 98.8% in 2019 to around 97% last year.
“Industry problem”
Automotive suppliers have been categorical that they cannot or cannot take on increased cost of 25% on non -compliant USMCA parts – prices that could be added to samples from steel and aluminum and other materials.
Swamy Kotagiri is CEO of Magna, based in Canada, a large world supplier for car manufacturers who also makes contractual manufacture for car manufacturers. He described the prices offered as “absolutely disruptive for industry”.
“This is the problem of the industry. I very firmly believe that it cannot be approached by any constituent,” Kotagiri, a veteran of the automotive industry, said in an interview last month. “Given the magnitude that is being discussed and talking, it is absolutely not possible for suppliers to take this.”
A survey earlier this month of 139 suppliers conducted by Mema revealed that the majority of parts manufacturers were affected by steel and aluminum prices, 97% expressing concerns concerning financial distress induced by prices among smaller “subplus” suppliers.
These suppliers generally manufacture smaller parts, but can easily cause disturbances in the supply chain if their production is affected. The importance of these suppliers was important during the coronavirus pandemic, when global supply chains were systematically upset due to disturbances of parts.
The leaders of the automotive supplier based in France Forvia earlier this month said that the company and its customers, including car manufacturers, had planned various emergency plans for prices.
“The whole supply chain cannot swallow 25%,” said Forvia CEO Martin Fischer, during a media event. “Cars will become more expensive for consumers if prices continue for a long time. The industry cannot ship to losses and swallow 25%.”