This is the reality of Trump's trade war
Tariffs imposed under Trump's trade war are causing higher costs and a significant administrative burden for the US car industry suppliers, with small firms increasingly taking on roles as tariff experts. For instance, Team 1 Plastics near Detroit orders dies from overseas, facing challenges due to tariffs. Canadian suppliers face 25% tariffs on steel, a result of US tariffs on Canadian aluminum and steel, with some suppliers testing the impact by sending dummy products to see if Customs and Border Protection applies charges.
A March order for a $300,000 machine from Japan incurred an additional $45,000 due to tariffs; Japan was subject to a 15% tariff at that time, compounded by subsequent steel and aluminum tariffs. Lucerne International, located in the Detroit suburbs, confronts 72.5% tariffs on steel and aluminum parts sourced from Asia. The company mitigates this by using foreign trade zone warehousing, which defers tariffs until goods leave the warehouse.
The cross-border supply chain between Detroit and Windsor, Ontario is highly interconnected, with parts crossing the border multiple times, typically six to eight times before final assembly. Most car components are exempt from tariffs if produced in the US, Canada, or Mexico; however, parts sourced elsewhere incur costs, adding complexity to the supply chain.
These tariffs are unlikely to provide quick relief. While they may eventually encourage manufacturing to return to North America, this shift will take years and is expected to raise costs for American consumers in the meantime.
