The global automotive supply chain has proved very resilient in recent years and has survived, economic downturns, pandemics, logistical chaos and wars. However, its latest threat is perhaps the most dangerous and unpredictable of all, the Trump administration. 

US President Donald Trump has announced a 25% tariff on all car imports into the USA from the start of April. This has already had an impact on European carmaker share values and provoked widespread global condemnation from both governments and manufacturers. 

Less well publicised has been a similar 25% tariff on automotive components imported into the US, which is likely to cause widespread disruption with component makers across the globe, as well as dramatically increasing prices for US car buyers. 

The Trump administration has bizarrely justified the decision on grounds of national security, citing continued risks posed by foreign automotive imports to the US industrial base. Trump has called April 2nd, the strategically chosen day tariffs are supposed to come into effect, "liberation day". It should also be noted that under existing international trade agreements these new tariffs are illegal. 

The European Automobile Manufacturers’ Association (ACEA) has reacted with its Director General, Sigrid de Vries saying,  “European automakers have been investing in the US for decades, creating jobs, fostering economic growth in local communities, and generating massive tax revenue for the US government. We urge President Trump to consider the negative impact of tariffs not only on global auto makers but on US domestic manufacturing as well.” 

He added, “Tariffs will not just impact imports into the US, a penalty that American consumers are likely to pay, but measures on automotive parts will also hurt auto makers producing cars in the US for export markets. European manufacturers export between 50% and 60% of the vehicles they make in the US, making a substantial positive contribution to the US trade balance.”

The impact of a 25% tariff on parts, if it is implemented in May, could arguably have wider consequences than tariffs on new cars. This is because even cars made in the US by US based manufacturers, which is a relatively small percentage of cars bought in the States, are made using  many imported components. Traditionally, many of these parts are described as North American sourced, meaning many are from Canada or Mexico and as such now also subject to tariffs. Even the vehicle with the highest US based content, the Tesla Model 3, uses 25% of components made outside of the US. 

It is also important to note that some 66% of all US made cars are produced by non US manufacturers, mainly, European, Japanese or Korean. These will have a very high percentage of components sourced outside of the USA. 

The fact is the USA simply does not have the capacity and in some cases the expertise, to manufacture parts required to service even its own vehicle manufacturing sector and this is before the even larger by volume aftermarket for parts is taken into account. 

Shifting to US manufactured components is therefore not only not possible in the short term, but would take years, or perhaps a decade to achieve and at greatly increased cost. 

As it stands, if these tariffs are implemented in the US, as described, not only will it have a massive global impact, it will also mean a rise in all new car prices in the USA, regardless of where they are made and an increase in parts prices which will lead to a massive rise in the cost of servicing and maintenance for the average US driver.