Car parts crisscross North America on their way to assembly. Under Trump’s plan, they’ll be hit with tariffs at every border crossing.
For North American automakers, the process to manufacture the rear suspension and drive components for a typical sport-utility vehicle (SUV) begins in three places: a steel mill in Pennsylvania, an aluminum smelter in Quebec, and a synthetic rubber factory in Monterrey, Mexico.
The Pennsylvania steel is shipped to a factory in Coahuila, a state in northern Mexico, where it is turned into springs. Those springs are then shipped to plants in places like Livonia, Mich., where workers assemble strut towers.
The Quebec aluminum is sent for casting in Coahuila and returned to Canada, this time Ontario, for machining. From there, it goes to a North Carolina plant where it is assembled into a differential, a gearbox that allows a vehicle’s wheels to turn at different speeds.
The rubber from the Monterrey factory may be shipped to Iowa to be turned into bushings, which may be assembled in a control arm in Ontario.
The suspension’s cradle is shipped from Kentucky, the trailing blades and brackets are from Ontario, while other pieces come from Puebla, a state in central Mexico.
It’s all shipped to factories in Detroit or Vaughan, Ontario where workers assemble the pieces into rear suspensions, which are then shipped to vehicle-assembly plants in places like Kansas City, Mo., Fort Wayne, Ind., and Windsor, Ontario.
This complex web of raw materials, parts, and supply chains, developed over decades of generally open trade between the United States, Canada, and Mexico, is at risk now of being crushed by President Donald Trump’s planned auto-parts tariffs, which are expected to go into effect next month, said Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association, or APMA. The association pieced together the rear suspension example from its own members’ contracts to highlight just how integrated and interdependent the North American auto industry has become over the last 120 years.
The impact of those tariffs, along with a new 25 percent tariff on all imported vehicles that is already in effect, threatens to cause a massive disruption of the auto industry, collapsing supply chains, skyrocketing prices, and resulting in fewer choices for consumers and difficult financial decisions for auto manufacturers, as well as their networks of parts suppliers and dealers.
Speaking with National Review, Volpe compared the North American auto manufacturing industry to an omelet: “You can’t unscramble it once it’s done.”
Under Trump’s tariffs, starting on May 3, an extensive list of key auto parts made in other countries and shipped into the U.S. will be subject to a 25 percent tariff, or tax. The administration is working to establish a process to apply tariffs to non-U.S. components of parts covered by the United States-Mexico-Canada Agreement (USMCA), negotiated during Trump’s first term.
Trump’s reasoning for the tariffs, according to the White House, is that they are necessary to “end unfair trade practices,” to address a “critical threat to U.S. national security,” and to strengthen the U.S. auto-manufacturing industry.
In a fact sheet championing the tariffs, Trump’s team cited a left-wing, organized-labor think tank and an article from a pro-tariff lobbying group. This week, amid talk of a possible recession, Trump indicated that he may pause the tariffs to give “automakers needed time to relocate production from Canada, Mexico and other places.”
Volpe called the president’s stated rationale for imposing the tariffs “abject bulls***.” The U.S.’s long history of cooperating with Canada on building and selling automobiles is not an economic emergency, and it does not constitute a national security threat, he said.
“We have been making these cars together since 1904 when Ford was a one-year startup and chose Walkerville, Ontario, which is near Windsor, to set up a plant to make cars . . . ironically, to get over the tariff barrier to sell cars to the British Empire markets,” said Volpe, who also noted that General Motors has been operating in Canada since 1918.
“If we are a national security threat, that was one hell of a sleeper cell,” he said.
Volpe, whose association’s suppliers have 170 factories in 26 U.S. states and 120 factories in Mexico, has likened Trump’s trade policy to “taking a dumpster fire and gently flicking it into a black hole.” He told National Review that the weight of Trump’s tariffs “will crush auto-parts suppliers or the weakest automaker balance sheets.”
“I’m not being critical of any of them. None of us modeled that the president of the United States would absolutely turn the full power of the Oval Office against their profitability,” he said. “None of these companies are charities.”
The free-market Cato Institute has called Trump’s auto tariffs “one of his most brazen — and foolish — moves yet,” predicting that they will unleash chaos for the industry in part because the tariffs seemingly would compound as parts travel back and forth over the U.S. border. “A single component could therefore be subjected to multiple rounds of tariffs, resulting in exponential increases in the overall cost of manufacturing,” according to Cato.
The APMA’s rear suspension example shows just how this could happen, depending on how the tariffs are structured and how the rules are applied in free trade zones — raw materials cross borders, where they’re turned into parts. Those parts are shipped to factories, often across borders, where they’re built into increasingly complex components, which cross more borders to be assembled into the suspension, which may cross the U.S. border again to be installed in a vehicle, gathering tariff upon tariff along the way.
“Donald Trump said no drawbacks,” Volpe said. “The way things usually work is, if it comes in and then it goes and comes in and goes and then it finally comes to a final customer, you zero out the stacked tariffs on the same good, so you’re not charging the same good every time. Now he’s saying it doesn’t matter, every time it crosses in it gets 25 points.”
Volpe gave a hypothetical example of a $100 auto part coming into the U.S., which would, under Trump’s tariffs, cost the customer $125.
“Then that part leaves and comes back as a part of a more complex assembly, that $125 value is now $125 plus 25 percent,” he said. “It’s a tariff on a tariff.”
That alone could add thousands of dollars to the price of a vehicle, even one that is technically built in the U.S. Trump’s tariffs on aluminum and steel will likely jack up prices even higher. As for cameras, sensors, and wire harnesses mostly built in China: “Now they’ve got a 148-percent stackable tariff on them,” Volpe said.
Auto-parts suppliers, he said, aren’t going to produce parts they’ll have to sell at a loss, which could collapse the North American auto supply chain. Ford CEO Jim Farley predicted that Trump’s tariffs would “blow a hole in the U.S. industry that we’ve never seen.”
“You can’t ship a car that doesn’t have all of the parts,” Volpe said. “We saw that during the semiconductor shortage [during the Covid-19 pandemic].”
Scott Lincicome, vice president of general economics at the Cato Institute’s Herbert A. Stiefel Center for Trade Policy, told National Review that the uncertainty around Trump’s tariffs “is just terrible for business.”
“It might not be cataclysmic, but it’s going to be very bad,” he said. “And the simple reason is this is an entire supply chain that has evolved over not just weeks or months, but decades, to assume seamless cross-border trade, and you just cannot flip a switch.”
As for bringing manufacturing back to the U.S., decommissioning existing plants in Canada and Mexico and building new ones in the U.S. would be a multi-billion-dollar, multi-year endeavor for each plant to make what they’re already making elsewhere. It’s likely a financial nonstarter for many companies, Volpe said.
“If you look at the balance sheets of the companies involved, it’s nonsensical,” Volpe said. “You’re going to bankrupt Ford and General Motors. And, by the way, if you ask Ford and General Motors if they want this, they say ‘No.’ Beyond that, they go to Washington and say they don’t want it. Who is [Trump] doing it for?”
The average price for a new automobile in the U.S. is now about $48,000. Trump’s 25-percent tariff on imported vehicles, which is already in effect, is essentially a $12,000 tax.
Automakers typically earn a six- or seven-percent profit on each vehicle, a few thousand dollars on average, Volpe said. If they or the dealers attempt to absorb the tax, as Trump has called for, they would most likely be selling vehicles at a loss.
Passing the tariff on to customers could raise the average imported car price to $60,000.
“Dealers aren’t going to take inventory that’s going to put them immediately underwater,” Volpe said.
Automakers are already reacting to Trump’s tariffs. Stellantis, which manufactures the Chrysler, Dodge, and Jeep brands, among others, has already paused assembly work at plants in Canada and Mexico, and laid off hundreds of U.S. workers who supplied engines to those factories. Trump was likely happy to hear that General Motors has announced it is increasing production of some light trucks at a Fort Wayne, Ind. factory, according to the New York Times.
But Volpe said a go-it-alone strategy for auto manufacturing won’t work for the U.S. in 2025.
He said the example APMA used of the rear suspension — the system that connects a vehicle’s rear wheels to its frame and keeps it off the ground — is an “incredibly representative rear-suspension assembly for an SUV or a cross-over vehicle.”
“I could have done one of these on an engine, hundreds if not a couple thousand parts that go into an engine and transmission assembly,” he said.
He also noted under the United States-Mexico-Canada Agreement, the trade agreement negotiated during Trump’s first term, 75 percent of a vehicle must be produced in North America to avoid tariffs. But a quarter of the vehicle can be produced elsewhere.
“If you want really complicated, the other 25 percent of the vehicle that’s not made in the USMCA, you’re going to have to draw maps to 24 other countries,” he said.
Some auto parts aren’t made in North America at all, including some rubber parts and electronics made mostly in Asia and fasteners and hoses that are manufactured in Eastern Europe, Volpe said. Moving that manufacturing to the U.S., “assuming that it can be done, you’re paying Americans $35 an hour, not $3 an hour,” upping vehicle prices, he said.
“The U.S. is not going to be able to manufacture globally-competitive vehicles either from a technology point of view or from a price point of view if they cut off one arm and one leg in Canada and Mexico,” he said. “We built it up together, but we’ve also become co-dependent on each other.”
“Nothing of what Donald Trump says can be accomplished can actually be accomplished without breaking a bunch of companies.”