Industry leaders call for predictable implementation, stronger North American coordination and trade policies aligned with automotive production realities
 
ANN ARBOR, MI – The Center for Automotive Research (CAR) today released an executive summary outlining key insights from its Impact of Automotive Tariffs: Understanding the Effects on Parts, Tooling and Vehicles roundtable, held June 17 in conjunction with CAR MBS 2026.

The discussion convened automakers, suppliers, researchers and representatives from the United States and Canada to examine how tariffs are affecting manufacturing decisions, supplier finances, tooling capacity, innovation investment and the competitiveness of the integrated North American automotive industry.

Participants described an industry facing compounding pressures. Existing supply-chain disruptions, slower-than-anticipated electric vehicle demand, stranded capital and workforce constraints have already weakened portions of the automotive supply base. Rapidly changing tariff policies are adding costs and uncertainty at a time when companies also need to invest in new technology, production capacity and talent.

“Trade policy has significant implications for where companies invest, how supply chains are structured and whether critical programs move forward,” said Elizabeth Krear, President & CEO of the Center for Automotive Research. “When policy changes faster than the industry can realistically adjust its sourcing, tooling and production footprint, the result can be less investment, not more. Long-term competitiveness requires predictable policy and a coordinated North American strategy.”

Operational Pressures Across the Supply Chain

Roundtable participants highlighted several immediate challenges:

• Rapid implementation: Tariffs introduced without sufficient transition periods can conflict with the long lead times required to qualify suppliers, purchase tooling and establish new production capacity.
• Pressure on capital investment: Companies are delaying programs, reducing capital expenditures and cutting costs to absorb tariff-related expenses.
• Tooling constraints: Longer lead times and higher costs for domestically produced machinery and tooling can make reshoring more difficult, particularly for smaller Tier 3 and Tier 4 suppliers.
• Reduced investment in innovation and talent: Resources that could support research, product development and workforce recruitment are instead being redirected toward managing near-term costs.
• Supplier financial strain: Some suppliers are absorbing tariff expenses to preserve customer relationships, creating financial pressure that may not be immediately visible to automakers.
• Growing administrative complexity: Changing policies and increasingly complicated supply-chain tracking requirements are adding cost and uncertainty throughout the industry.

Participants cautioned that these pressures can weaken the same domestic supplier and manufacturing capabilities that trade policy is intended to strengthen.

North American Integration Is a Competitive Asset

The roundtable also emphasized the highly integrated nature of automotive production across the United States, Canada and Mexico. Parts, materials and vehicles frequently cross national borders multiple times during the production process, making the region’s competitiveness dependent on predictable and efficient cross-border trade.

Participants argued that treating North American allies in the same manner as overseas competitors can create unintended consequences for U.S. manufacturers, suppliers and automotive states. The Great Lakes region, and Michigan in particular, was identified as especially exposed to disruptions in U.S.-Canada automotive trade.

The discussion emphasized that each USMCA country contributes distinct production, workforce, natural-resource, technology and market advantages. Together, those capabilities provide a stronger platform for competing against increasingly integrated global automotive industries.

Policy Considerations

Participants identified several approaches that could better align trade policy with automotive operating realities:

• Phase in tariff changes to provide time for feasible sourcing and production adjustments.
• Support advanced manufacturing and automation that can offset labor shortages and improve productivity.
• Streamline permitting and reduce unnecessary compliance burdens for production and trade within North America.
• Provide greater policy consistency so companies can make long-term investment decisions.
• Preserve and strengthen a trilateral North American trade framework through the upcoming USMCA review.
• Evaluate tariffs within a broader competitiveness strategy that includes innovation, workforce development, tooling capacity and supply-chain resilience.

“The United States cannot strengthen its automotive industry in isolation from Canada and Mexico,” Krear said. “A competitive North American industry requires policies that recognize how the region actually designs, sources and builds vehicles. CAR will continue providing independent analysis that helps policymakers understand both the intended and unintended consequences of trade decisions.”

CAR will use the perspectives gathered during the roundtable to inform future research and analysis related to tariffs, USMCA, automotive investment and North American competitiveness.

The executive summary, Impact of Automotive Tariffs: Understanding the Effects on Parts, Tooling and Vehicles, is available at https://www.cargroup.org/wp-content/uploads/2026/07/Impact-of-Automotive-Tariffs-Whitepaper-2026.pdf.