(The Center Square) – Tariffs intended to rebuild America's auto supplier base may be weakening its most fragile tier, an independent Center for Automotive Research roundtable warned, with small suppliers absorbing the costs.
The findings come from an executive summary of a June 17 roundtable, released July 27 by CAR, an Ann Arbor-based group that convened automakers, suppliers and researchers from the U.S. and Canada. The pressures they described, the group warned, "can weaken the same domestic supplier and manufacturing capabilities that trade policy is intended to strengthen."
Participants said the strain falls hardest on the smallest firms. Lead times for domestically produced tooling have doubled, and Tier 3 and Tier 4 suppliers – the small shops that feed parts up the chain – often cannot afford the tooling needed to shift work domestically.
To hold onto automaker business, many are absorbing the cost of the 25% tariff President Donald Trump imposed on certain imported vehicles and parts in March 2025, financial pressure, the report said, is "not immediately visible to automakers."
"When policy changes faster than the industry can realistically adjust its sourcing, tooling and production footprint, the result can be less investment, not more," said Elizabeth Krear, CAR's president and CEO.
The roundtable faulted the near-instantaneous rollout of tariffs, which participants said clashes with the years it can take to qualify suppliers, buy tooling and stand up domestic production.
The strain lands on an industry already weakened by slower-than-expected electric vehicle demand, stranded capital and supply-chain disruption, according to the CAR summary. To protect margins, some automakers and suppliers are delaying programs and cutting research and development, and the sector is losing engineers and other skilled workers to higher-paying technology firms.
The stakes are high in Michigan, where Canada is the largest trading partner and the roundtable singled out the Great Lakes region as especially exposed to disruptions in U.S.-Canada auto trade. Canada faces a separate round of duties: on July 20, Trump invoked Section 338 of the Tariff Act of 1930 for the first time, imposing 50% tariffs on about $20 billion in Canadian goods, effective Aug. 19.
The administration casts the tariffs as a national-security measure to rebuild a hollowed-out supply base, noting parts-manufacturing jobs have fallen 34% since 2000. To cushion domestic assembly, it offers automakers an offset worth up to 3.75% of the value of vehicles they build in the U.S., relief that flows to the automakers rather than the small suppliers below them.
At a Michigan event Monday, Trump said companies that build in the U.S. "pay zero tariff."
CAR said it would use the discussion to inform future research on tariffs, USMCA and North American competitiveness.
"The United States cannot strengthen its automotive industry in isolation from Canada and Mexico," Krear said.
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