US carmakers face $7bn hit as tariffs expose supply chain vulnerabilities

The White House's tariff regime, designed to bolster American automotive manufacturing, is instead inflicting significant financial damage on the industry it intended to protect, with the three largest US carmakers projecting a combined $7bn impact on 2025 earnings.

Automakers absorb substantial costs

Ford, General Motors and Stellantis are collectively anticipating tariff-related losses of $7bn in the current fiscal year, according to company projections. The levies have created cascading effects throughout the automotive supply chain, affecting thousands of component manufacturers and suppliers across the US.

Suppliers grapple with price increases

Mid-sized suppliers are bearing a disproportionate burden of the tariff regime. Team 1 Plastics, a Michigan-based manufacturer, experienced a 15 per cent price increase on a $300,000 injection moulding machine imported from Japan due to the new levies.

"That's real money where I come from," said Gary Grigowski, vice-president and co-founder of Team 1 Plastics. "It's a cost that has to be recovered somehow."

Michigan alone hosts more than 1,000 automotive suppliers producing components ranging from steering columns to windscreen wipers. These companies are confronting supply chain disruptions, elevated input costs and diminished cash flows.

Global dependencies remain entrenched

Industry executives emphasise that domestic automotive production remains fundamentally dependent on global supply networks, despite policy efforts to promote manufacturing localisation.

"As much as we want to build walls around ourselves here and live in this protected box, it's impossible," said Mary Buchzeiger, chief executive of Lucerne International, a vehicle component manufacturer. "We just don't have the manufacturing footprint any more to produce everything we need to consume here in the US."

Mixed impact on supply chain strategy

Research from PYMNTS Intelligence indicates that 92.6 per cent of goods-producing firms report higher raw material costs, whilst nearly three-quarters cite shortages or delivery delays for certain products.

However, the disruption has prompted strategic recalibrations. Some 70.4 per cent of surveyed firms view tariffs as an opportunity to support local economies, whilst 40.7 per cent report improved supply chain resilience. Many companies are pivoting from single-source imports towards multi-sourcing and nearshoring arrangements, despite higher near-term costs.

The automotive sector's experience illustrates the complex trade-offs inherent in protectionist trade policy, where intended beneficiaries may bear substantial costs before realising uncertain long-term gains.