US automotive suppliers face looming risks amid tariffs and global tensions

U.S. automotive suppliers show resilience amidst industry turbulence, but mounting tariffs, supply chain risks, and financial pressures threaten their stability in a rapidly evolving market landscape.

Automotive suppliers in the United States have so far demonstrated resilience amid a turbulent industry landscape marked by tariffs, high interest rates, and the complex transition to electric vehicles. However, industry experts and legal advisors caution that the sustaina...

bility of this endurance is uncertain as challenges accumulate that could precipitate disruptions or insolvencies in the near future.

The current environment is described as highly volatile, with significant nervousness among Tier 1 suppliers who provide approximately 77% of a vehicle’s value but operate on narrowing profit margins. Falc Borchard, vice president of sales at PIA Automation GmbH, an international machinery supplier to the auto sector, highlighted the uncertainty firms face regarding strategic decisions amid market instability. Legal experts such as Jeff Lamb and Robert Riley of Detroit’s Honigman LLP note that while widespread bankruptcies are not yet occurring, the industry depends heavily on collaboration and cost-sharing arrangements that might not be sustainable if vehicle production declines as some analysts forecast.

This collaboration has been a key factor in absorbing tariff-related costs distributed across the supply chain, preventing catastrophic financial failures for now. Riley emphasised the unusual level of cooperative spirit between automakers and suppliers, despite rising tensions and increased potential for litigation driven by financial pressure. Agreements are increasingly flexible, with automakers like General Motors reportedly updating contracts to allow price adjustments based on transparent cost assessments, attempting to share the burden equitably.

Nevertheless, signs of strain are evident. Major suppliers have issued distress signals: German powerhouse Robert Bosch has announced plans to cut 13,000 jobs by decade’s end, and multibillion-dollar bankruptcies have occurred at companies such as Marelli Inc. and First Brands Group LLC. Smaller suppliers, particularly those with fewer resources and staffing, face the greatest risk of downsizing or closure as they struggle to absorb tariff impacts. Industry forecasting expert Sam Fiorani notes that while larger Tier 1 suppliers have room to maneuver and maintain operations, smaller manufacturers lack this latitude and are more vulnerable to financial distress.

Adding to these challenges, recent government trade measures are reshaping the landscape further. On October 17, 2025, President Donald Trump signed orders instituting new tariffs, including a 25% levy on imported medium- and heavy-duty trucks and parts, and a 10% tariff on imported buses, effective November 1. These actions are framed as efforts to bolster domestic vehicle and engine production, supporting U.S. manufacturers like General Motors, Ford, Toyota, Honda, Stellantis, and Tesla, which will benefit from expanded tariff relief credits. These credits effectively offset some tariffs by providing manufacturers a 3.75% rebate based on the suggested retail price of eligible U.S.-assembled vehicles extended through 2030. Despite opposition from trade advocates concerned about harming relationships with allied countries, administration supporters argue the measures are essential to protect U.S. production from unfair global competition.

These tariff policies impact suppliers in complex ways. Autoliv, the world’s largest airbag and seatbelt maker, reported a 14% increase in adjusted operating profit for Q3 2025, attributing much of its success to effectively passing about 75% of U.S. import tariff costs onto customers, with continued cost recoveries anticipated. However, the broader supplier base remains pessimistic. Surveys conducted by Automotive News and the Motor & Equipment Manufacturers Association reveal growing concern, with many suppliers reporting volatile sales, significant margin pressures, and a challenging environment for financial planning.

The industry also faces external supply chain risks. A looming chip shortage, prompted by geopolitical tensions involving the Chinese-owned chipmaker Nexperia and Dutch government intervention, threatens to disrupt U.S. vehicle production. The Alliance for Automotive Innovation has warned that failure to resolve chip delivery issues could impact manufacturing as soon as next month, illustrating the fragility of supply chains amidst intensifying global political conflicts.

Meanwhile, other suppliers are signaling caution through downgraded forecasts. French tire manufacturer Michelin, heavily exposed to the North American market, recently cut its 2025 financial outlook due to unexpectedly weak demand and import tariff challenges. The downturn in replacement tire sales and declining vehicle volumes underscores the interconnected nature of supplier fortunes with broader consumer and economic trends.

In financial markets, larger auto suppliers like Magna International, Lear Corp., BorgWarner, Dana Inc., and Cummins have performed relatively well, with share prices generally up this year. Executives from these companies have reassured investors that they are actively mitigating tariff impacts through strategic agreements and operational adjustments.

Looking ahead, much depends on how well suppliers and automakers can maintain their collaborative approaches to weather tariffs, manage evolving supply chain risks, and navigate shifting consumer demand amid rising vehicle prices — which recently hit record averages above $50,000. The coming months are critical, with major suppliers poised to report third-quarter earnings that will further illuminate the sector’s trajectory.

In sum, while the U.S. automotive supply industry shows remarkable adaptability under pressure, the accumulation of tariffs, market volatility, and international trade tensions are testing its limits. The next year may prove pivotal in determining whether the sector can avoid significant disruptions or broader insolvencies, particularly among smaller suppliers who lack the financial resilience of their larger counterparts.

Source: Noah Wire Services