The Detroit News
March 5, 2025
Schwab, Noble, Ramseth
Washington — Even with President Donald Trump granting an ambiguous one-month delay of blanket 25% tariffs on imported vehicles from Canada and Mexico, auto industry observers said Wednesday the continuing trade drama is harming business and sowing confusion.
“While another postponement of the White House’s proposed tariffs on automotive-related trade between the U.S. and Canada and Mexico is somewhat of a reprieve for the industry, damage has already been done,” said Glenn Stevens, executive director of the Detroit Regional Chamber’s MichAuto.
“For an industry that operates in three-to-five-year product cycles, this level of day-to-day uncertainty is debilitating.”
The exemption, negotiated by what White House press secretary Karoline Leavitt called the “big three” Michigan automakers, halts costly trade barriers that would have been disastrous for an industry with highly integrated supply chains across the three countries. It also comes after domestic automakers cried foul over tariffs impacting their North American products but not vehicles imported from overseas, mostly by foreign rivals from Europe and Asia with U.S. operations.
In a press conference Wednesday, Leavitt said Trump had conversations with representatives from Ford Motor Co., General Motors Co. and Stellantis NV about the tariffs that went into effect Tuesday. The midday Zoom call included Trump, Commerce Secretary Howard Lutnick, the CEOs of Ford and GM and the chairman of Stellantis, according to a source familiar with the situation.
Reading a statement from Trump, Leavitt said: “We spoke with the big three auto dealers. We are going to give a one-month exemption on autos coming through USMCA,” referencing the U.S.-Mexico-Canada free trade agreement negotiated during Trump’s first term.
“Reciprocal tariffs will still go into effect on April 2,” she added. “But at the request of the companies associated with USMCA, the president is giving them an exemption for one month, so they are not at an economic disadvantage.”
Details Unclear
Leavitt, however, did not provide more details on exactly whether the exemption applies only to fully assembled vehicles or includes auto components shipped repeatedly across borders throughout the manufacturing process. But if the exemption does leave USMCA rules fully in place, then it is likely that all qualifying automotive goods are eligible.
The USMCA, which Trump signed during his first term, has extensive provisions on automotive rules of origin. Those rules govern which goods are eligible for preferential treatment, like reduced tariffs or duty-free trade.
The agreement dictates that finished vehicles and “core auto parts” must have 75% North American content to avoid any otherwise applicable tariffs and 65-70% for other parts. Core parts include engines, transmissions and advanced batteries, among others.
USMCA also includes rules requiring that 40-45% of the labor for a vehicle’s production must come from North American workers earning at least $16 per hour and that 70% of a vehicle manufacturer’s steel purchases by value must originate from within the three countries.
Existing policy dictates that passenger cars failing to meet USMCA requirements are subject to a 2.5% tariff, whereas light-duty trucks are subject to 25%.
After falling sharply Tuesday, stocks of Stellantis, Ford and GM all surged Wednesday as news spread that the automakers were set to be at least temporarily exempted from the tariffs. The United States imported more than $461 billion worth of automotive goods in 2024, nearly half of which came from Canada and Mexico.
Stevens, of MichAuto, said Wednesday afternoon it wasn’t immediately clear which automakers or suppliers would get the monthlong breather, and which won’t, outside of GM, Ford and Stellantis.
“It’s a reprieve, it’s a delay, but it doesn’t solve the issue for the industry — certainly if it’s just another 30 days,” Stevens said. “We’ve already seen damage done. What’s going to happen in another 30 days?”
Chauncey Mayfield II, a corporate attorney who leads law firm Honigman LLP’s Commercial Transactions Practice Group in Detroit, said auto suppliers were seeking clarification on whether their components still would be subject to the tariffs.
“Is it only just the vehicles, or does it also include the parts?” Mayfield said. “Because if you don’t include the parts, then you’re only putting a Band-Aid on a very large wound.”
He added that the one-month reprieve isn’t enough time to move production out of the neighboring countries to the United States, and there isn’t sufficient clarity on the trade policy to make those decisions.
“You’ve just delayed when I am going to be economically disadvantaged,” Mayfield said.
Worries Continue
Stevens said it was good news that executives from the Detroit Three had been able to convey the complexity and importance of the industry, and the need for tariff relief, to the Trump administration in recent days.
But the delay won’t mean business can get back to usual, he said, as the automakers will continue to delay major decisions on expansion or product launches until there is more certainty. Those delayed investment decisions have trickle-down effects, affecting the planning and financials of suppliers.
Executives with Forvia SE, a major auto supplier with operations in the United States, Canada and Mexico, said they had been able to plan ahead for the tariffs’ implementation by building up stockpiles of some products in the United States. But depending on the product, they said those inventories might only last about a week.
The French company that makes seats, lights, electronics and other car parts halted its shipments Tuesday when the tariffs took effect, its new CEO, Martin Fischer, said in Detroit. But by Wednesday, Fischer and Francois Tardif, who oversees the supplier’s North American operations, said they had begun reaching agreements on how to proceed — on a component-by-component basis — with some customers.
Forvia, which has dozens of locations in Mexico, has identified some extra plant capacity in its large U.S. footprint where it could shift production to avoid tariffs. But Fischer said such a decision likely will not occur until a couple of months from now, if it becomes clear tariffs will be in place long-term.
Team 1 Plastics, a small Albion company that makes various types of plastic components for cars, was scrambling in recent days to figure out what it had on order that might be subject to tariffs. Much of their raw plastic materials come from the United States, said Gary Grigowski, vice president and co-owner.
But the company realized it had a nearly $50,000 order for specialized shipping boxes that come from Mexico, which weren’t on route by the time the tariffs took effect. Now the company is trying to figure out whether it wants to pay extra, or hold off on the shipment for now. Team 1 also uses specialized metal dies that mold plastic, some of which are sourced from Canada. That had Grigowski and his colleagues pondering this week: Did we have any orders from up north that are wrapping up? The answer was no, but the company will need more soon — and the pricey dies will also be impacted by expected steel and aluminum tariffs.
Grigowski said government decision-makers might not “realize how fragile the industry is,” how it’s already faced stress in recent years, and how some companies could even shutter because of rising costs.
Warren Browne, an auto supplier consultant and former GM executive who worked at the automaker for 40 years, also said he was skeptical that the one-month reprieve would do much to settle the industry or increase the chances of automakers or suppliers bringing more production to the United States.
“To change tariffs every day and not have a situated trade policy is just as bad as having high tariffs,” he said. “The outcome of allowing the furor to have a daily change in tariffs is a strategic hold across the supply chain.”
The delay will allow the components and vehicles already in production to pass through, but uncertainty remains about tariffs and how long they could remain in place.
“The unintended consequences will be that they won’t move back to the U.S.,” Browne said. “Suppliers and autos won’t know what the next move is. They’ll just pass the cost on to customers. Why would you move Equinox and Blazer back to Orion (from Mexico) if the stuff is going to go away in six months because fentanyl drops?”
Automakers, he added, already will have communicated their policy preferences on trade to the Trump administration, and the president’s actions in instituting the duties on Tuesday show indifference.
Politicians, Detroit Three React
The American Automotive Policy Council, a lobbying group that represents the Detroit Three automakers in Washington, praised the pause.
“American Automakers Ford, GM and Stellantis applaud President Trump for recognizing that vehicles and parts that meet the high US and regional USMCA content requirements should be exempt from these tariffs,” said Matt Blunt, AAPC president and former Republican governor of Missouri. “We look forward to working with President Trump and his administration on our shared goals of increasing US automotive production and expanding exports to markets all around the world.”
In a Wednesday evening statement, Ford also expressed appreciation for Trump backtracking on the tariffs.
“As America’s top auto producer, we appreciate President Trump’s work to support our industry,” the company said. “Since President Trump’s successful USMCA was signed, Ford has invested billions in the United States and committed to billions more in the future to both invest in American workers and ensure all of our vehicles comply with USMCA.”
The company said it hopes to “continue to have a healthy and candid dialogue with the Administration to help achieve a bright future for our industry and U.S. manufacturing.”
In a statement, GM said: “We thank President Trump for his approach, which enables American automakers like GM to compete and invest domestically. With more vehicle assembly plants in the U.S. than any other automaker, GM has invested over $60 billion since the USMCA took effect, and we continue to invest billions of dollars every year in our manufacturing base, supply chain, and U.S. jobs.
Stellantis also thanked Trump and noted that it had announced “major investments” for its U.S. operations in the first 100 hours of his new administration. “We share the president’s objective to build more American cars and create American jobs,” the automaker said.
Republican U.S. Rep. John James, who represents a suburban Detroit district with a major automotive industry presence, suggested Wednesday that he played a role in encouraging the exemption.
“@realDonaldTrump is standing up for Michigan workers and Michigan’s economy,” James wrote in a social media post. “Trump understands the complexity of the auto industry. I have been in contact with Secretary @howardlutnick and the Trump Administration, as well as reps of the auto industry.”
He added: “We will continue to work to get more cars built in MI, more cars sold around the world, and more jobs back in MI!”
Democratic U.S. Rep. Debbie Dingell, a longtime voice for the auto industry in Washington, also praised the pause.
“This delay is a positive step to give our auto industry more time to talk these issues through and to have important discussions with all stakeholders involved,” the Ann Arbor lawmaker said in a statement. “As I’ve said, tariffs are a tool in the toolbox, but they must be strategic and support American jobs — not create uncertainty that undercuts our domestic manufacturing.”
Asked if Trump expects automakers to be able to shift more production to the United States within a month, Leavitt said the president told the Michigan automakers that “they should get on it.”
“Start investing, start moving. Shift production here to the United States of America, where they will pay no tariff,” she said. “That’s the ultimate goal.”
North of the border, Canadians remain skeptical of Trump and his willingness to upset a longstanding friendship between the United States and Canada.
“Here we go again,” said Matthew Holmes, vice president and head of public policy for the Canadian Chamber of Commerce. “We’ve seen this movie before. President Trump puts tariffs in place and then doles out exemptions one at a time. That is not how a long-lasting trade alliance is built.”