Core Insights - The U.S.-Mexico-Canada Agreement (USMCA) is under review, prompting manufacturers to consider strategies to minimize tariff exposure [1][5] - Cross-border trade has been affected by the transition from NAFTA to USMCA and the imposition of tariffs, with significant duties on non-compliant imports [2][3] - Companies are reassessing their compliance with USMCA to leverage tariff exemptions, which has led to competitive advantages for some [3][6] Trade Dynamics - The U.S. imports $505.5 billion from Mexico and $411.9 billion from Canada in 2024, making them its largest trading partners [3] - Tariff exemptions have encouraged firms to evaluate their products for compliance, although the overall tariff situation remains uncertain [2][4] Manufacturing Strategies - Manufacturers with global supply chains are hesitant to make significant changes due to the fluid tariff situation and upcoming USMCA review [4][5] - Some companies are exploring shifting manufacturing to Mexico, but there has not been a significant resurgence in U.S. manufacturing interest [4][5] Compliance Benefits - Companies already compliant with USMCA are experiencing reduced costs and gaining market advantages [6] - Methode Electronics and Newell Brands have reported increased business due to their USMCA-compliant operations, allowing them to avoid tariffs [7]

Core Insights - Proposed tariffs by President Trump on goods from Mexico and Canada are expected to impact automotive suppliers more severely than automakers, potentially leading to broader industry disruptions [1][4] - Compliance with the USMCA is crucial for avoiding tariffs, with a significant portion of vehicle parts not meeting the stringent standards [2][3] Industry Impact - The automotive supply chain is already fragile post-COVID, facing challenges such as high interest rates, labor shortages, and declining profits, which could be exacerbated by new tariffs [4][5] - Major publicly traded suppliers have seen stock declines, with companies like American Axle & Manufacturing Holdings and Magna International down by double digits this year [5] Compliance Statistics - In 2024, only 63% of motor vehicle parts imported from Mexico were compliant with USMCA standards, compared to 92.1% of motor vehicles [6][12] - For Canada, 74.6% of motor vehicle parts and 96.9% of vehicles were imported tariff-free under USMCA in 2024 [6] Tariff Effects - The proposed tariffs could lead to a 25% increase in costs for non-compliant parts, which suppliers are unlikely to absorb, potentially leading to higher consumer prices for vehicles [13][17] - A survey indicated that 97% of parts makers expressed concerns about financial distress due to tariffs, particularly affecting smaller suppliers [15] Supply Chain Resilience - The supply chain is described as resilient yet fragile, with significant challenges in quickly adapting to major policy shifts [8][9] - Executives from various companies, including Forvia, have indicated that the industry cannot sustain the proposed tariffs without passing costs onto consumers [17]