As the world braces for Donald Trump’s return to the presidency, the global automotive industry finds itself on the precipice of significant changes.
The former President, who is set to return to office on January 20, has vowed to impose aggressive tariffs on imports. These measures include a blanket 10% tariff on global imports into the United States, a 60% tariff on Chinese goods, and even a 25% tariff on imports from close trade partners such as Canada and Mexico. For auto suppliers and manufacturers, the stakes have never been higher.
At the recent Consumer Electronics Show (CES) in Las Vegas, key industry players shared how they are preparing to mitigate the potential impact of these policies. The overarching strategy is clear: rethink production plans, shift operations closer to the U.S., and reduce dependence on China.
Table of Contents
Tariff Pressures: The Looming Cost of Protectionism
For the auto industry, tariffs of this magnitude could drastically reshape production economics. According to Paul Thomas, North American President for Bosch—the world’s largest car parts supplier—even a 10% tariff could require reevaluating current supply chains. A 60% tariff on Chinese goods, however, would make selling products sourced from China in the U.S. nearly impossible.
“Anyone can do the math,” Thomas remarked, emphasizing how critical it is for companies to adapt their strategies to protect profit margins. Bosch, for instance, has already started exploring alternative production sites in countries like Mexico and Brazil, leveraging existing footprints to prepare for potential tariff hikes. However, the company plans to wait until Trump officially takes office before making any major commitments.
The auto industry’s experience during Trump’s first term underscores the gravity of these decisions. His previous use of tariffs as leverage to compel companies to relocate production to the U.S.—such as when Toyota shifted its Corolla sedan production from Mexico to a joint Alabama plant with Mazda—left an indelible mark on industry practices.
This time, however, the stakes are higher. Suppliers and automakers face not only potential tariffs but also the challenge of balancing cost-efficiency with localization in an increasingly fragmented global trade environment.
Check also: Renault 5 Turbo 3E: The Electric Revival of a Rally Legend
Shifting Production Strategies
The auto industry has been on a steady path toward localization, a trend accelerated by both protectionist policies and supply chain disruptions during the COVID-19 pandemic. Many suppliers have already made significant strides in producing components closer to their end markets.
For example, Continental, one of the world’s largest automotive suppliers, has long pursued a strategy of regionalized production. According to CEO Nikolai Setzer, Continental is relatively insulated from the impacts of Trump’s tariff plans due to its existing localized operations. Nevertheless, the company is actively working with North American suppliers to identify alternatives for any imported components, reinforcing its commitment to avoiding costly tariffs.
Similarly, Honda, which produces 200,000 vehicles annually in Mexico and exports 80% of them to the U.S., is reconsidering its production footprint. Depending on tariff levels, the company may shift some production away from Mexico entirely, potentially relocating operations to Japan or other regions. These strategic pivots illustrate the industry’s determination to adapt, even as uncertainty looms.
The Biden administration’s Inflation Reduction Act (IRA), which incentivized domestic EV production, further spurred localization efforts. However, Trump’s intention to dismantle parts of the IRA creates additional uncertainty for companies balancing long-term investments with immediate policy risks.
See also: Aston Martin Valhalla: The 1064-HP Hybrid Supercar That Redefines Speed
Reducing Dependence on China: A New Priority
While tariffs on imports from Canada and Mexico are concerning, Trump’s proposed 60% tariff on Chinese goods has ignited a more urgent response. For years, Chinese suppliers have been integral to the global auto industry, particularly for electronic components and EV battery materials. But as protectionist policies gain momentum, companies are racing to reduce their reliance on Chinese content.
Panasonic Energy, a major EV battery supplier for Tesla, is a prime example. The company has been gradually shifting its supply chain to North America, forming partnerships with Canadian natural graphite producer Nouveau Monde Graphite and synthetic graphite anode material supplier Novonix. With Trump’s return to power imminent, Panasonic is accelerating efforts to eliminate all Chinese content from its U.S.-produced batteries.
“Not having the supply chain dedicated from China—that’s the No. 1 objective,” said Allan Swan, Panasonic Energy’s North American President. Although Chinese materials currently represent a small fraction of the company’s supply chain, the move reflects a broader trend among automakers and suppliers aiming to insulate themselves from geopolitical risks.
The shift away from China aligns with a growing consensus among industry leaders: the need for diversified, resilient supply chains. The combination of pandemic-driven disruptions, trade wars, and now Trump’s tariff threats has reinforced the importance of securing production closer to key markets.
