The U.S. administration’s threatened 25-percent tariffs on almost all imports into the country from Canada and Mexico are still due to take effect on April 2nd. And one of the sectors most exposed to the damage those tariffs could wreak is the automotive one. There could be disastrous consequences for both consumers and many industry players, not least carmakers and their suppliers.
Behind the scenes, many are taking proactive steps to try to minimize the impact of tariffs, but it will be difficult.
Ford is stockpiling parts in anticipation of April 2nd, as well re-evaluating its cross-border operations. The auto giant is asking its suppliers to continue to deliver under existing contractual terms, while examining the impact the duties will have.
On March 14, Ford explained in a letter sent by supply chain manager Liz Door to suppliers that as the deadline approaches, Ford is “strategically stockpiling components where it is cost-effective and parts that are not pending engineering changes.”
The company is also reassessing logistics routes and border crossing plans to maximize efficiency.
“As the situation continues to develop, we require all suppliers to continue shipping parts in accordance with existing contractual terms, including pricing and delivery schedules. We ask that you continue to utilize your best commercial efforts and encourage your team to take all possible measures to minimize the impact to your business and Ford," Door wrote.
Severe impacts anticipated
Industry experts believe that many parts manufacturers, especially smaller companies, will collapse under the weight of 25-percent duties.
That message has been given loud and clear to the Trump administration by manufacturers, but it’s anyone’s guess if it is listening.
The hope is that the automotive sector will be spared by the 25% tariffs until the current free trade agreement between Canada, Mexico and the U.S. is renegotiated. Talks are scheduled for next year, unless the parties agree to sit down for negotiations sooner.