‘We need USMCA': Auto suppliers face distress from Trump tariffs
SOUTHFIELD, Michigan - Working to have the U.S. government honor conditions of the United States-Mexico-Canada trade agreement is a top priority for the vehicle suppliers' lobbying trade group, the association's leaders said Friday.
"For the U.S. to be globally competitive, we need USMCA," Paul McCarthy, president-elect of MEMA and president of its aftermarket suppliers group, said before the Automotive Press Association.
Supplier outlooks are down among MEMA's more than 1,000 members. Three quarters are expecting worse financial performances in 2025 than they had anticipated coming into 2025. With their median break-even point expected to be North American production of 14.5 million vehicles this year, up from 14 million because of tariffs, the industry is in a precarious position: Data firm S&P Global Mobility was predicting production at 13.9 million to 14.3 million ahead of President Donald Trump offering some relief measures late last month.
"This is an industry under pressure, and our strategies, our investments are on hold, and that's not a good thing for what is the largest manufacturing sector in the U.S.," McCarthy said, noting suppliers contribute 2.5% of U.S. economic activity.
Auto suppliers still are navigating a bunch of tariffs: President Donald Trump has instituted import taxes of 25% on steel and aluminum, 25% on certain auto parts and at least 10% on imports from most countries around the world with some of the heaviest on Canada and Mexico, where vehicle supply chains even for U.S.-produced vehicles are tightly woven.
About 71% of imported materials and components used by MEMA's members are USMCA-compliant, and MEMA is providing resources to help more become compliant to avoid 25% tariffs.
"We've all invested for the last 20 or 30 years into the North America supply chain," said Collin Shaw, president of MEMA's original equipment suppliers group, "and every country in USMCA offers something unique and has something to bring to the table to ensure that, from a competitiveness standpoint, we can compete with the rest of the world."
He emphasized suppliers have added 61,000 U.S. manufacturing and salaried jobs in the years since Trump signed USMCA in 2020.
"That is aligned with the administration's goals," McCarthy said, "that a strong U.S. requires a strong region to be competitive again."
Although there are signs there should be strong auto demand as the average age of vehicles on the road increases, Shaw said, more than half of MEMA members report they are less competitive because of the tariff situation, and 53% are worried about sub-tier supplier distress as tariffs raise costs and are expected to increase vehicle prices.
"New orders are down, and costs remain elevated," said Mike Jackson, MEMA's executive director of research and insights, "and this is a very tough situation for the supplier industry."
Of MEMA members, 7% said they have implemented furloughs, 5% have instituted temporary wage reductions, 43% have delayed capital expenditure spending, 38% have restricted travel and 15% have taken other actions because of tariffs.
"They can't see the complete picture," Jackson said, resulting in deferred spending.
Some suppliers, though, say they are moving forward with investments. Paul Thomas, president of major auto supplier Robert Bosch GmbH in North America and of Bosch Mobility America, this week said the German manufacturer isn't holding off investing and is moving forward with $6 billion in announced U.S. investments since 2023. He, however, also emphasized the need for stability in trade policy.
"I'm really focused on the future and the profitable growth opportunities for Bosch here in North America and specifically in the United States," Thomas said. "To achieve that growth, we are investing."
Honoring USMCA and making tweaks as needed would help to offer the industry the stability it needs to make long-term decisions and hopefully provide opportunities to level the playing field for all suppliers looking to invest in the United States, Shaw said.
He added that it's also risky to have production consolidated in one place: "We have to have that diversified supply chain so that we're not at risk, whether it's a supply chain shock like we saw with tsunamis, or geopolitical tensions like we're seeing today. We have to have a diversified supply chain."
MEMA also is urging certainty on regulations of greenhouse tailpipe emissions. Trump has ordered a reevaluation of rules finalized by the Biden administration and is seeking to remove California's waiver allowing it to have stricter standards that 13 other states and Washington, D.C., have adopted. Delays on launches, production volume changes and less-than-expected demand for EVs have created challenges for suppliers too.
MEMA also urges permitting reforms to increase the speed of U.S. expansion, retaining the Inflation Reduction Act that former President Joe Biden signed in 2022 that granted incentives to manufacturers of U.S. batteries, a "pro-business" tax environment, incentives for research and development and support to increase skilled tooling talent in the country, McCarthy said. He said the ability to deduct R&D spending proposed in the Ways and Means Committee's budget is a good step forward.
"But that just brings us up to the rest of the world," McCarthy said. "It doesn't give us any advantage."
Copyright (C) 2025, Tribune Content Agency, LLC. Portions copyrighted by the respective providers.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
23 minutes ago
- Yahoo
How a multibillion dollar defence bank could help Canada increase its military spending
A new multilateral defence bank aims to help Canada and its allies build their militaries to meet looming threats in an increasingly hostile world while also giving Canadian industry a leg up when it comes to producing weaponry and military kit to tackle those threats head on. And its Canadian president is hoping it will have a major presence in Toronto. Announced this past spring, the new Defence, Security and Resilience Bank could solve financial problems for countries, including Canada, that are under pressure to increase military spending beyond two per cent of their gross domestic product (GDP). Some estimates peg the more likely target as five per cent of GDP as Russia and China grow increasingly belligerent on the world stage. 'We have to use our capital markets of allied nations for overwhelming force against our foes,' Kevin D. Reed, the new bank's president and chief operating officer, said in a recent interview. The theory is the bank would allow Canada and other countries to re-arm, said Reed, who has helped start nine companies including Equity Transfer & Trust. 'Hopefully that acts as a form of deterrent against big conflicts.' The United Kingdom 'has emerged as the lead candidate to take this on,' according to Reed. 'That being said, we've … advocated to our Canadian government that there's a window here for Canada to take a co-leadership role with the U.K.' Reed would like to see a branch of the bank located in Toronto. If Canada chose to be the bank's host nation, or to co-host with London, 'you're probably looking at 2,500-3,500' banking jobs in Toronto, he said. The bank would be owned by member nations, including NATO and Indo-Pacific countries. 'They would capitalize the bank, we would get a triple-A rating, and we would take it to the bond market to raise money,' Reed said. 'If we have all 40 nations in, we would expect about $60 billion of equity into the bank over time, and then subject to the bond markets we would seek to raise $100 billion at first, taking that up to about $400-500 billion over time.' For countries that don't have a triple-A credit rating, it would mean a lower cost to capital, he said. It would also allow nations in immediate need of more defence dollars to tap the bank for money, rather than waiting for annual budget cycles. 'The real driver in this is that it would provide credit guarantees to commercial banks to lend into the defence sector,' Reed said. 'Most commercial banks … unless you're a big prime (like Boeing), if you're a number two or three or four in the supply chain, you're almost unbankable, historically, because of ESG (an investing principle that prioritizes environmental and social issues, as well as corporate governance) and just a view of defence.' The Defence, Security and Resilience Bank would be similar to Export Development Canada, a Crown corporation that provides financial and risk management services to Canadian exporters and investors, 'but way bigger,' Reed said. It would offer large banks such as RBC and BMO credit guarantees 'that would loosen up capital so they could offer lines of credit, trade finance, you name it, but we can grow the industrial base a lot faster,' Reed said. That would, in turn, speed up military procurement, he said. 'It takes nine years to get a jet or seven years to get a shoulder-fired rocket launcher,' Reed said. 'It's because the industrial base just isn't big enough. It's been constrained. So, this would push liquidity into the commercial banks.' Sovereign countries could also 'enhance procurement' by borrowing from the Defence, Security and Resilience Bank on the promise that they 'have to execute within two years,' Reed said. 'We want to foster that rapid-fire procurement that we know has been a problem for all member nations.' Right now, it takes 16 years for startups to go from selling the Department of National Defence on their products to procurement, he said. 'Companies just can't live in that — they call that the Valley of Death,' Reed said. 'That is a problem. If you want to invent a new bullet … in your garage, you're going to wait a long time.' Rob Murray, NATO's inaugural head of innovation and a former U.K. army officer, started writing the blueprint for the bank about five years ago. But, at the time, interest rates were flat, Russia hadn't launched its full-scale war in Ukraine, and U.S. President Donald Trump was not in power. You do not attract first rate people with third rate infrastructure. And right now, you go to any garrison, any base, any wing across Canada and the infrastructure is crumbling When the Ukraine war began, interest rates started climbing and people started recognizing 'threat levels are changing around the world,' Reed said. Then Trump came to power in his second term and started 'forcing the hand of many NATO nations' to increase their defence spending, Reed said. Murray published his blueprint last December. 'On the back of that he was invited down to brief the president elect down at Mar-a-Lago,' Reed said, 'and Rob's world just started to expand rapidly with proposed member nations seeking him out, asking how would this work? How can we get involved?' Murray asked Reed to step in as the bank's president in early February 'to help stitch together the coalition of governments' needed to bring the idea to fruition. 'Every European nation has been briefed,' Reed said. 'And we did the briefing for Canada right after the election' with senior people in Prime Minister Mark Carney's office, the Privy Council Office, and departments including National Defence, Finance, Global Affairs and Treasury Board. Reed also briefed officials in Singapore last week and plans to do the same in Japan, South Korea, Australia and New Zealand this week. 'We're trying to drive this around a consensus of a dozen anchor nations,' he said. NATO figures from last June suggest Canada spent just 1.37 per cent of its GDP on defence in 2024. The Liberals have said they expect it to reach two per cent by 2030 'at the latest.' But that's not fast enough for Trump, who has complained repeatedly about Canada piggybacking on the U.S. for military protection. 'While I don't like what he's saying, I see this as an opportunity to get ourselves going,' Reed said. 'We have not done our job in a long time. We've not fulfilled our commitments, and this a kick in the pants to say who are we, and what do we stand for?' Later this month, Reed expects NATO countries to accept a new spending minimum of 3.5 per cent of GDP for defence and 1.5 per cent for border security. 'To go from our base today … it's another $100-110 billion a year to ramp up to that,' he said of Canada. 'And that's not in future dollars. That's in last year's dollars. So, any available mechanism that can help grow the industrial base and get them towards those NATO soon-to-be targets is going to be well received.' Founding members of the bank will start meeting in the fall to hammer out details. Reed anticipates standing up the bank next year. 'I like the idea of another mechanism, and a very powerful and large one, and I think a very influential one, that can help us do more in the defence and security domain in Western democracies,' said retired general Rick Hillier, Canada's former top soldier, who has joined the Defence, Security and Resilience Bank's board of directors. He predicts Canada is going to need 'a revolution in defence and security procurement' to solve the Canadian Forces' equipment woes. More money could accelerate the acquisition of new aircraft, warships and submarines, he said. 'The component I'm most worried about is the army,' Hillier said. 'The army is broken. We're down people. Our bases and our infrastructure are in very sad condition. And we lack every kind of capability that a force needs in the kind of areas where we would find ourselves fighting right now. If things go south in Eastern Europe and (Vladimir) Putin and Russia get into some kind of thing they can't extract themselves from and start heading into Lithuania and Latvia, where there are several thousand Canadians, our sons and daughters, we are ill-prepared to insure that they're ready to look after themselves.' The army lacks self-propelled artillery pieces, air defence systems, technology that can detect, track, and neutralize drones, and equipment to remove minefields, Hillier said. 'We need to focus a huge amount of that defence spend on the army.' Canada has also been lagging in spending to defend our north, he said. 'We've got to know what's going on in the Arctic, to be able to see what's going on specifically, to be able to communicate what's going on and then to be able to respond to what's going, whether its air, land, or depending on the time of year, sea forces. Right now, we can only do a very small part of that.' The country needs satellites and ultra-long endurance drones to cover the north, Hillier said. Bases should be built in Inuvik, Rankin Inlet, and Iqaluit, he said. 'Then you have to connect … those spots by upgrading the airfields across the north.' The military also needs billions of dollars to repair and replace old buildings, Hillier said. Canada's military has a shortfall of about 15,000 people right now, Hillier said. 'You do not attract first rate people with third rate infrastructure. And right now, you go to any garrison, any base, any wing across Canada and the infrastructure is crumbling.' At CFB Trenton, the military's hub for air transport operations in Canada and abroad, people can't even drink the water on the base 'because it's contaminated,' Hillier said. At CFB Petawawa, 'the fire hall they've been trying to replace for years floods in any kind of a rainstorm,' he said. 'As soon as it shuts down, you shut down operations in that training area, in that garrison, for the brigade, for the helicopter squadron and for the special forces training centre.' Hillier believes the Defence, Security and Resilience Bank could help alleviate all of these problems. 'There's an enormous amount of momentum because the inherent good in it is evident to most people as soon as they sit and think about what it could achieve,' he Two ways to boost Canadian defence spending and minimize Trump's tariff threats Canada's boutique military: 'Should we not be able to defend ourselves?' Our website is the place for the latest breaking news, exclusive scoops, longreads and provocative commentary. Please bookmark and sign up for our daily newsletter, Posted, here.
Yahoo
30 minutes ago
- Yahoo
The Weekend: Tesla's problems mount as Trump-Musk 'bromance' hits the rocks
It was a moment many had predicted from the outset, a question of when rather than if. The wheel finally came off the Trump-Musk "bromance" in spectacular fashion on Thursday, wiping more than $150 billion off the value of Tesla and dragging down the broader market. The world's richest man kicked things off by describing Trump's signature "big, beautiful bill" aimed at extending tax cuts a "disgusting abomination." Trump responded by calling his electoral backer "CRAZY!", threatening to slash government contracts and subsidies key to Musk's business interests and telling reporters he was "disappointed" in him. Things only got more heated from there. The very public spat only adds to Tesla's woes. The electric vehicle maker's market capitalisation has fallen almost 30%, or $380 billion so far this year, the biggest drop of any large company globally. Elon Musk is at war with whole swaths of Trump's agenda Elon Musk cemented his break-up with Donald Trump this week with a move against the president's signature legislative priority: the One Big Beautiful Bill Act. But the scope of his attack broadened on Thursday with Musk making a case not just against that bill but with ever-widening critiques that now span significant chunks of Trump's political agenda. Musk's posts have seen him floating everything from the concept of impeachment to calling the president a liar to the false accusation that Trump 'is in the Epstein files' and covering it up. Trump, unsurprisingly, was quick to retaliate, calling his former friend "CRAZY!" and threatened to terminate Musk's governmental subsidies and contracts. ECB cuts interest rates for eighth time in a year In what ECB president Christine Lagarde described as an "almost unanimous decision" the central bank chopped rates by a quarter of a percentage point for the eighth time in a year. The move, which was widely expected, follows a drop in eurozone inflation to 1.9% last month, just below the 2% target for the first time since last September. Investors are now pricing in a pause in rate cuts in July, and some conservative policymakers have also advocated for a break to give the bank a chance to reassess uncertainty and the future outlook. UK house prices rise as higher wages, low unemployment boost market Property prices gained some momentum in May, with annual growth increasing to 3.5%, according to figures from Nationwide. The uptick comes amid signs that activity in the housing market is holding up well, despite the end of a stamp duty break. Low unemployment, rising real wages, strong household balance sheets, and the potential for lower borrowing costs were among the factors buoying the market. BoE governor expects interest rates and pay to decrease this year When quizzed along with other members of the Monetary Policy Committee in a Treasury Committee meeting, Andrew Bailey said his main consideration for the most recent rate cut was the question of domestic inflation. He also cited the loosening of the UK's labour market as a key indicator in the decision to cut rates by 25 basis points. On the question of future cuts, external MPC member Catherine Mann said the bank could not yet say how fast or how far it would look to cut. Another member, Swati Dhingra, said there was a "general view that we don't need to weigh down on living standards as much as we have been." To personal finance now. As the government's spending review looms large, speculation about what will change is ramping up. Heavily debated taxes, such as rules around gifting and inheritance tax, could be in the crosshairs. Yahoo Finance's Lucy Harley-McKeown examined the possibilities: How next week's spending review could impact your finances There was bad news for home-seekers this week. No major lender cut its rates, with the majority hiking mortgages for first-time buyers as the market moves away from a mini price war that had pushed deals deep into sub-4% territory. Vicky McKeever brought us the best mortgage deals on the market right now: Mortgage lenders raise rates amid uncertainty over BoE interest rate cuts Find more personal finance gems here: Money Matters On the company results calendar, TSMC ( TSM) will release its latest sales figures after the CEO saying that demand remained strong for artificial intelligence chips. Tesco (TSCO.L) is set to provide a bellwether update for the UK grocery market. Its first-quarter report comes with supermarket price wars on the horizon, as shops fight to retain customers. In the housebuilding sector, investors will want to see how Bellway (BWY.L) is performing against key targets set out by the company's CEO earlier this year. Zara owner Inditex ( reports results on Wednesday, with investors' eyes on its margins following a disappointing report in in to access your portfolio
Washington Post
40 minutes ago
- Washington Post
Musk has billions, but Trump has the presidency. In their feud, that counts for more.
There will be no true winners in the spectacular breakup between President Donald Trump and Elon Musk, two alpha males with enormous egos and a penchant for rhetorical combat — and for excess. To many Americans watching it all, the two deserve each other. But in the end, Musk should know who truly holds the cards, and it's not him. The implosion that occurred Thursday was an irresistible spectacle pitting the most powerful person in the world against the richest person in the world. It was made for cable news and social media, and neither could get enough of it. Many Republicans who couldn't look away were nonetheless alarmed at the potential fallout. The marriage of convenience between Trump and Musk took root last year with Musk's endorsement and an infusion of an estimated $288 million into the effort to elect Trump president. It carried on into this year, with Musk given broad powers to cut down the executive branch through his U.S. DOGE Service, and he was sometimes described almost as a co-president rather than a volunteer. Musk may have confused the difference. The relationship between the two was one that many who knew them both believed would inevitably end in divorce. That the breakup was as swift and as acrimonious as it was reflected the personalities of the two. The split has implications both substantive and political — and for Musk there are monetary issues to consider, given the size of the government contracts with his businesses and the risk of a decline in the value of Tesla stock. At heart, however, this is a personality clash — pitting a volatile business talent, though a political novice, against a president with shrewd political instincts who has long displayed an appetite for street fights when attacked. Trump also has something Musk does not have, which is the votes of 77 million people and a MAGA (Make America Great Again) movement behind him, including some like Stephen K. Bannon who have been openly hostile to Musk. It's difficult at this moment to expect that Trump and Musk will return to their earlier relationship, however fraught it always was despite the public bonhomie at Cabinet meetings and in the Oval Office. But it's also in the interest of both not to perpetuate this very long. For Trump and the Republicans in Congress, the most pressing concern is Musk's ability to torpedo the 'One Big Beautiful Bill' that is the summation of the president's legislative ambitions for this year and perhaps his entire second term. The measure passed the House by a single vote. It cannot pass the Senate without some rewriting, though how much is up in the air. Musk's declaration that the bill is a 'disgusting abomination' helped trigger the conflict between the two men and adds ammunition for those who want more spending cuts. The question is how much Musk's opposition adds to the difficulties of finding a compromise among the competing GOP factions. It's easy to see why GOP leaders are unsettled by Musk's initial attacks on the bill and now his feud with the president. Trump already was facing a sizable job in lobbying lawmakers to win passage of the bill. Any loss of focus on the legislation by the president could be costly, as defeat would deal a devastating blow to Trump and congressional Republicans. House Speaker Mike Johnson (R-Louisiana) said on CNBC Friday that failure to pass the bill ultimately would cost Republicans control of the House in next year's midterm elections. That's stating the obvious, but then again, passage of the controversial measure also could imperil the House majority. No one can say whether Musk has the focus or the staying power to engage in a constructive debate about the bill beyond the broad claim that it's just too expensive. Absent something more substantive and targeted in his critique, members of Congress could dismiss him as just another billionaire who knows less than he thinks he knows — and a rich guy angry because federal subsidies for the purchase of electric vehicles would be eliminated (though Musk claims he doesn't really care about that). Though there are worries about Musk's role, some Republicans downplay his influence. 'As a practical matter, he'll have almost no impact on the legislative process,' former House speaker Newt Gingrich (R-Georgia) said. Gingrich went on to praise Musk as a business genius and someone whose SpaceX rocket company is vital to the United States winning the space battle against China. But as he noted, many business titans, from automaker Henry Ford to inventor Thomas Edison to IBM founder Thomas Watson, were never president. His argument was that Musk, like many business executives, knows almost nothing about politics. 'These are two dramatically different cultures,' he said. But for Republicans there is another concern about Musk, which is the possibility that he will use his vast wealth to try to defeat GOP lawmakers who support the bill. Could he intercede in Republican primary elections? Could he recruit challengers to punish those he sees on the wrong side of the fiscal debate? All that is possible, but there are other factors to consider about Musk's ability to play successfully in future political campaigns. Some strategists who have watched him in action believe the odds are low that his impact would be as great as his bank account might suggest. Musk claimed on Thursday that without his efforts Trump would not have won the 2024 election. That's questionable, though one can see why he might think so. But there are doubts in Republican circles about how effectively Musk's money was spent last year. In politics, he has been undisciplined and is seen as surrounded by mostly tech people who also are not skilled at politics. One of his more recent forays into politics came earlier this year, when he decided to get involved in the Wisconsin Supreme Court election. He and allied groups put about $20 million into the race to support Brad Schimel, the conservative judge running against Susan Crawford, the liberal judge. Musk held a rally the weekend before the election, elevating himself almost as the face of the contest. In the end, Crawford won by a margin of 10 percentage points. In May, apparently sobered by the embarrassing loss, Musk said at the Qatar Economic Forum that he would be spending 'a lot less' on campaigns unless he saw a good reason to do otherwise. He sounded disillusioned with politics at the time and eager to shift his focus back to his business interests. He did not sound like someone with an appetite to build an effective political machine capable of recruiting candidates, developing messages and turning out voters. Maybe this is the time, but there is reason for skepticism. One of Musk's postings on X on Thursday also caught the eye of veteran political strategists. It was when he asked, 'Is it time to create a new political party in America that actually represents the 80% in the middle?' For some Republicans, that might have been alarming, given the resources at his control and the general disillusionment among many voters with politics as usual. For others, however, it signaled that Musk fundamentally misunderstands the structure of America's two-party system. Over many years, various politicians and strategists have talked about organizing the 'sensible center' of the electorate, without success. The experience of the No Labels group in the 2024 cycle was the latest such effort, ending with an acknowledgment that the leaders could not attract a candidate with a credible path to victory. Musk's talk about a third party is little more than musing at this point. Musk's experience with DOGE is enough by itself to question his future role in legislative or campaign politics. His impatience, his break-first-worry-later approach and his lack of understanding of the government all doomed him to fall far short of his grand expectations. 'Had Elon been capable of listening and going slower, he would have had enormous impact. But it's not who he is,' Gingrich said. 'Had he matured into a serious commentator and implementer, then he would have had enormous influence.' Trump said Friday that he's not paying any attention to Musk. That's an overstatement, but the president has more important things to worry about in leading the country and dealing with a complicated set of issues globally. Just laying out the menu of challenges is a reminder of the powers of the presidency. Musk may have thought he was a peer to the president, but he now could learn more about what his real role was and will be.
