Navigating Steel Tariffs in Automotive Supply Chains

Steel and aluminum materials are key in manufacturing. The automotive industry now faces new challenges from significant trade policy changes, with more potential changes or delays to come. 

Industry leaders and manufacturers will face challenges with the new 25% import tariffs issued by the United States on steel and aluminum. They will deal with disrupted supply chains and higher costs both in the United States and abroad as trading partners like Canada and the EU implement retaliatory tariffs on metal imports. They must also adapt quickly to these changes. 

Figure 1: Percentage imposed on steel and aluminum tariffs with direct impact to automotive supply chains 

Automotive supply chain vulnerability 

Navigating this environment requires more than reactive strategies for industry professionals—procurement specialists, supply chain managers, and C-suite executives. To handle these tariffs well, businesses need clear supply chain mapping solutions. These solutions should reduce risks and create new chances to innovate and grow.  

No matter if you’re investigating the current or proposed tariffs, the following points are critical for you to know. Here’s our comprehensive guide to understanding, adapting to, and thriving under these new tariffs. 

The new tariff landscape explained 

The 2025 steel and aluminum tariffs reintroduced by the Trump administration are groundbreaking in scope, with the key changes detailed below:  

• Flat 25% tariff: Starting March 12, 2025, President Trump is bringing back the full 25% tariff on steel imports. He is also raising tariffs on aluminum imports to 25%. 
• Expansion to downstream products: Unlike earlier tariffs, these duties now include finished and semi-finished goods. This means items like shaped metals, extrusions, or assembled parts, which are important for making cars. 
• No exemptions: Canada, Mexico, and the European Union will have to pay the same tariffs as other nations. All 3 were previously granted exemptions to these metal tariffs after they were first imposed by the Trump administration in 2018. Given their cumulative nature, non-USMCA-originating imports of steel, aluminum, and in-scope derivative products now face up to 50% tariffs in light of separate 25% tariffs imposed on Mexican- and Canadian-origin goods. Currently, exemptions for USMCA-originating goods are set to expire on April 2, putting further metal imports at risk of compounded tariffs.. . In the automotive industry, low costs and quick access to steel and aluminum are critical. 

How metal tariffs impact the automotive industry 

Steel and aluminum are integral to vehicles, from lightweight frames to electric vehicle battery casings. But the blanket nature of these tariffs creates complex challenges:

1. Rising costs of vehicle production

The average vehicle contains almost 1,000 pounds of steel and about 500 pounds of aluminum. The new 25% import tariffs are likely to significantly increase raw material costs. Industry estimates suggest production costs may rise by as much as $1,500 per vehicle, reducing profit margins. Car makers need to make quick adjustments to their production costs. 

2. Automotive supply chain disruptions

The tariffs will force U.S. manufacturers that depend on international suppliers to pay duties or switch to domestic sources. However, even imported vehicles, especially those from Canada and Mexico, could feel significant impacts from tariff measures given the integrated nature of the North American automotive supply chain. Due to the bloc’s history of free trade agreements, parts often cross borders multiple times before reaching the final assembly destination; depending on the scope of tariff measures, it is possible metal components could faces tariffs at each border crossing. 

3. Automotive OEM and supplier struggles

Original Equipment Manufacturers (OEMs) like Ford and GM may have a better ability to restructure their supplier bases. However, smaller suppliers reliant on international sourcing may not be as flexible and can struggle to shift to local or alternative supply networks. As a result, these suppliers may face higher operational costs,  creating higher costs and weaknesses in the supply chain. In some cases, suppliers may be forced to limit their production to accommodate price hikes, which can cause delays and longer delivery times.  

Small businesses depend on global sourcing. They struggle to transition to local or other supply chains. Doing so would lead to higher operational costs. These suppliers might struggle with everything from delayed payments to reduced inventory.  

Strategies for mitigating tariff risks 

While the unfamiliar landscape is daunting, organizations that take swift and strategic action can stem potential fallout. Here’s how: 

1. Supply chain mapping and risk assessment

Understanding who supplies your suppliers can be the difference between supply chain disruption in the automotive industry and resilience. Use advanced supply chain mapping tools to: 

• Identify supply chain vulnerabilities: Trace every tier of your supply chain, from Tier-1 suppliers to raw material providers. 
• Evaluate financial exposure: Analyze how tariff costs will impact specific products or components and prioritize high-risk areas. 
• Enhance transparency: Modern supply chains are no longer linear—they’re matrix-like networks. Understanding this complexity is key to identifying weak links. 

Did you know? Hidden costs in sub-tier suppliers can make up to 40% of unexpected price increases from tariffs. If manufacturers do not manage these costs, they can hurt profit margins.

2. Optimize product classification and valuation

Tariffs vary tremendously based on product classification. Procurement teams can lower tariff burdens by optimizing classification and applying valuation rules, such as the “First Sale Rule.”  

The “First Sale Rule” lets importers value goods based on the price of the first sale. This is different from using the final sale price. 

This can help reduce the amount of tariffs owed, as it often results in a lower declared value for customs purposes. By improving product classification and using the First Sale Rule, businesses can lower their tariff costs. This is especially important for dealing with automotive supply chain issues and managing tariff-related expenses. 

3. Develop alternative sourcing plans

Relying less on imports from tariff-heavy regions can offer considerable savings. For example: 

• Shift sourcing to domestic suppliers—though U.S. steel prices may rise with increased demand, this alternative avoids import duties. 

• Explore new trading relationships in regions unaffected by tariffs. 

4. Invest in collaborative supply chain platforms

Collaborative platforms like Everstream Analytics deliver actionable insights by monitoring regulatory changes, global trade fluctuations, and material flow disruptions. 

Looking ahead—The long-term road for the auto industry 

The effects of these tariffs won’t remain confined to short-term costs. Long-term, strategic changes will be inevitable for manufacturers and their automotive industry supply chain structure. 

1. Supply chain restructuring

Shifting procurement frameworks to favor localized sourcing will accelerate, with multi-year plans to establish U.S.-based manufacturing hubs. 

2. Production and sales impact

Production decreases for tariff-sensitive vehicles will reduce overall output.  

U.S. automakers might face lower sales in the country because of high prices. Electric vehicles (EVs) will likely be hit even more by these tariff measures as they are also reliant on steel and aluminum in addition to the rare earth/critical minerals tariffs needed for batteries.  

3. Innovation and investment shifts

To combat escalating costs, many companies are doubling down on integrating EVs, autonomous systems, and shared mobility services. The economics align—higher sales margins from technology-driven vehicles can offset the drag of costlier materials.  

Also, improving operations and using new technology will include AI-powered tools for supply chain mapping. These tools will help us adapt to the future driven by electric vehicles. 

Why automotive supply chain mapping is imperative 

Proactive supply chain mapping ensures your business doesn’t just react to tariffs, but stays ahead of the curve. 

• Transparency across levels: Spot potential problems before they happen. This could be a supplier going bankrupt or experiencing material delays because of border issues. 
• Mitigating regional and global risks: From chip shortages to forced labor issues, top mapping tools help with thorough checks. 
• Anticipate and adapt: Watch for global signals like political unrest or severe weather. Use AI predictions to change supply strategies before disruptions occur. 

Key features your mapping platform should include: 

• Tiered supply visibility beyond Tier-1 suppliers. 
• Tracking and analyzing component movement through distribution channels. 
• Real-time notifications of potential risks, including tariff adjustments or geopolitical conflict. 

Taking the driver’s seat in preparing for tariffs 

The 2025 steel and aluminum tariffs underscore a simple truth. The global automotive supply chain is more interconnected than ever, but also more fragile. Balancing near-term disruptions with long-term strategies will distinguish industry leaders from those caught unprepared. 

If ensuring risk-free production has taught us anything, it’s that knowledge is the ultimate advantage. No matter what happens, you need visibility into your critical supplier connections so you know where to take action. Everstream Analytics offers innovative tools to map, watch, and manage your suppliers. Feel confident as you prepare for tariffs, trade wars, and more.