Intensifying trade tensions between Canada and the U.S. could have a devastating impact on auto parts companies if the issues aren’t resolved.
The details: Many parts suppliers are smaller companies that don’t have the flexibility of automakers to adjust operations, mitigate the impact of tariffs, or absorb higher costs, according to NPR.
These smaller parts companies include manufacturers of everything from bolts to rods used in steering wheels.
For these businesses, tariffs compound the financial impact of COVID-era supply chain shortages and the start-and-stop ramp-up to EV production.
What they’re saying: " It's really, really damaging to the industry and to the financials of the industry. It makes planning for things very difficult," said Dan Hearsch, global co-leader of automotive and industrial at the consulting firm AlixPartners, per NPR. "It's one more thing, on top of the one more thing, that was on top of the one more thing, that was on top of the one more thing."
Why it matters: Financial pressure on smaller parts suppliers could eventually ripple through vehicle production, potentially creating higher costs, parts shortages, or other disruptions that affect inventory and service operations for dealers.
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Between the lines: The potential impact of lingering trade tensions is even more concerning given the complexity and interconnectedness of the auto parts supply chain as trade tensions between the U.S. and Canada escalate.
Even a fundamental vehicle component such as a steering wheel can consist of dozens of different parts sourced from around the world, Hearsch explained.
The different supplier tiers—including Tier one suppliers that deliver parts to automakers, Tier two suppliers that produce components for Tier one, and Tier three suppliers that feed parts to Tier two—add to the complexity.
The raw materials used to make parts—including steel and aluminum—add yet another layer of complexity to the auto parts supply chain.
What they’re saying: "The vehicle supplier industry has built deeply interconnected North American supply chains over decades, and policies that increase costs or create barriers ultimately weaken the competitiveness of the entire region as we face challenging global competition," said The Motor & Equipment Manufacturers Association trade group, per NPR.
Bottom line: The U.S.-Canada trade dispute poses risks well beyond automakers, with smaller suppliers potentially among the most vulnerable to prolonged tariffs.
Financial stress or disruptions anywhere in the deeply interconnected parts network could ultimately ripple through vehicle production, pricing, and availability, creating additional challenges for dealers already navigating an uncertain trade environment.
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