Two attorneys from Dykema — Laura Baucus, director of the automotive industry group and founder of the firm’s supply chain group, and Tina Toma, a litigation attorney specializing in automotive procurement and supply chain management — discuss how automotive importers will be affected by new tariffs imposed by the Trump administration.
The automotive industry is highly complex, involving many suppliers and parts that cross borders multiple times before final assembly of vehicles. Tariffs, says Baucus, “could potentially add costs at every stage.” Smaller entities might fight it impossible to sustain operations if they have to bear that additional expense.
Duties are payable at the border, and if importers’ logistics partners don’t keep good records of those assessments, they could end up paying two to three times the amount of the tariff, Toma warns. “So it’s important to have a supportive team that understands those nuances.”
Tariffs can be imposed by a president’s executive order, and importers generally don’t have adequate notice of the change, Toma says. Parts importers could end up paying the additional amount even if the goods are already in transit at the time of the action.
Purchase contracts generally don’t allow for price adjustments in the event of a change in tariffs, Baucus says. It’s critical, therefore, that importers fully understand their pricing terms, supply sources and options such as force majeure.
Beyond that, importers should examine contracts to see if they allow for alternative sourcing, or the option of acquiring parts domestically.
There’s the possibility that the Trump tariffs will trigger retaliation in kind from trading partners, and even spark an all-out trade war, but Toma doesn’t see that happening. More likely, she says, is that the tariffs are being floated as a means of obtaining concessions in upcoming trade negotiations.
Should that strategy fail, Baucus says, companies need to explore the possibility of substituting materials that aren’t subject to the tariffs, or rethinking the flow of parts and products to minimize the number of border crossings.
