Chauncey Mayfield II, partner and leader in the commercial transaction and practice group of Honigman LLP, discusses the uncertainties and cost of President Trump’s latest round of tariffs on automotive parts crossing the Canadian and Mexican borders.

The tariff situation seems to change every day, but President Trump is still threatening 25% tariffs on imports from Canada and Mexico, in addition to imposing a 25% levy on imported steel and aluminum, and contemplating doubling that for metals coming from Canada.

Even before the tariffs are actually implemented, however, the uncertainty arising from their ultimate amount and timing is having an impact on automotive supply chains, according to Mayfield. “In order to have a fully functioning and compliant supply chain, there needs to be some certainty into when things are done,” he says. The mere threat of tariffs can disrupt current contracts and logistics arrangements.

Some product might not be scheduled for delivery until weeks or months in the future, “but you have to make a contractual commitment now,” Mayfield says. “When things are constantly changing, there’s no way to react.” And somebody has to pay the resulting cost.

As it currently exists, the North American auto industry couldn’t withstand 25% tariffs for an extended period of time. The answer could lie in supply chain restructuring, with production shifted to the U.S., but “these aren’t things that can happen overnight,” Mayfield says. It takes time to lease new facilities, tool up a factory, certify it for quality, hire staff and then produce at the level demanded by the marketplace.

Companies that have undertaken the nearshoring of production from China to Mexico in recent years could lose out if imports from the latter are saddled with a heavy tariff. “They’re not necessarily going to be able to recover their investment in those facilities,” he says.

In the end, manufacturers will have to decide whether the cost of producing in the U.S. is lower than the tariffs on imports, Mayfield says.