Why automakers' short reprieve from tariffs isn't enough to weather Trump's escalating trade war

DETROIT (AP) — President Donald Trump's short reprieve for U.S. automakers from stiff tariffs on imports from Mexico and Canada isn't likely to allow enough time for those companies to make the changes necessary to minimize the damage from Trump's intensifying trade war.

Trump granted a one-month exemption to 25% tariffs on vehicles and auto parts traded through the North American trade agreement USMCA after speaking with leaders of automakers Ford, General Motors and Stellantis, the White House said Wednesday. Trump then broadened the exemption beyond autos for Mexico on Thursday.

In response to concerns about the short timeline for auto companies, White House Press Secretary Karoline Leavitt noted that Trump told the companies to “start investing, start moving, shift production here.”

It's just not that simple.

Automakers “will be hit differently based on exactly where their supply chain is,” said John Paul MacDuffie, professor of management at the University of Pennsylvania. In particular, "GM and Ford have shrunk back from a formerly much more global footprint, but they still are global companies.

“Of course, if the goal is to move a lot of production to the U.S.,” he added, “I guess you could. But I don’t see those changes happening quickly.”

Automakers responded to Wednesday's news graciously. Ford said in a company statement: “We will continue to have a healthy and candid dialogue with the Administration to help achieve a bright future for our industry and U.S. manufacturing.” Both GM and Stellantis thanked Trump for the exemption in statements.

Matt Blunt, president of the American Automotive Policy Council, which represents the three automakers, said he applauds the president "for recognizing that vehicles and parts that meet the high U.S. and regional USMCA content requirements should be exempt from these tariffs.”

But with only a monthlong grace period, automakers know challenges lie ahead.

Why is this so hard for auto companies?

To be sure, as automakers spent decades expanding around the world, they frequently battled supply-related woes and policy changes that hindered production — and their bottom lines.

A disaster halfway across the globe impacting one tiny component, with no easy or obvious supply alternative, can take down a vehicle's production for weeks.

Contentious labor negotiations and work stoppages have put significant pauses on automaking for the domestic car companies.

The COVID-19 pandemic also interrupted global supply chains and sent new and used vehicle inventory to disastrous lows on dealer lots, causing prices to skyrocket.