The automotive aftermarket is wrestling with the ramifications of what the President has called the “most beautiful word in the dictionary.” Tariffs.
As the Trump Administration levies duties totaling an estimated cost of billions of dollars for North American automakers and their suppliers to date, the automotive aftermarket is also wrestling with the ramifications of what the President has called “most beautiful word in the dictionary.” Tariffs.
“Many of the government’s efforts often seem to be focused on luring automaker plants back to the U.S. And the aftermarket and suppliers — and ‘Main Street’ consumers — need to be protected from any crossfire from that,” said Paul McCarthy, president of MEMA, The Vehicle Suppliers Association, during a recent media briefing.
“When the Administration thinks of automotive and trucks, they need to understand the distinct needs and challenges of the aftermarket and of its suppliers.”
MEMA representatives have had dozens of recent meetings with numerous government departments that are involved in tariff decisions, including U.S. Trade Representative Jamieson Greer, U.S. Department of Commerce, Department of the Treasury, Office of the Vice President, National Economic Council, and Customs and Border Patrol.
“We’ve gotten every meeting that we can and argued that the aftermarket is what most impacts consumers’ pocketbooks in America,” McCarthy said. “Ninety-five percent of American consumers are not in the new car market in any given year — they [rely on the] service and repair market.”
While aftermarket suppliers have told the Administration they support the goal of strong U.S. manufacturing and security, they have also stated there are certain auto parts that can’t be sourced from the U.S, either at all or in sufficient quantity or quality.
“It’s been an interesting journey. At first, it was somewhat of a fight and an education process just to be heard. But I think with persistence in telling our story, there was a willingness to listen to our pain points. All kinds of ideas were discussed, even tariff relief, including for aftermarket parts and the consumers who rely on us.”
McCarthy noted that there have been instances where supplier advocacy has worked, including USMCA exemption, which is key for aftermarket suppliers that have nearshored their facilities. While the government is interested in what grows U.S. manufacturing, “which is certainly an important portion of the aftermarket supply chain, it’s certainly not all of it. We are pro competition, as long as everyone’s playing by the same rules.”
In a testament to the aftermarket’s endurance, it has held up reasonably well despite the trade policies (the industry has been largely, and historically, resilient to downward economic forces). But now there are new pain points for suppliers that come with today’s policy climate: market uncertainty, volatility and cash flow issues, to name a few.
McCarthy related that some MEMA supplier members have been saddled with unsellable parts from times of extraordinary high tariffs. “One member has a warehouse full of parts that came in during one of the tariff spikes, so he can only sell it at a massive loss at this point.”
MEMA’s exporter members are also facing headwinds and increasing costs, including those for steel, aluminum, copper and other components that amplify reshoring expenses. Additionally, those who are looking to invest in reshoring or nearshoring must find the monies to fund it.
“It’s hard. There’s also been some costs of wrong bets. Some members have said, ‘I thought India was going to be a safe place to move things out of China. Mexico, is that our best solution? Is it safe? Is it target number one? Not quite sure.”
McCarthy added that in order to reshore, it also requires equipment, tools and machinery, and it’s also difficult to find workers and plants. “There’s another thing that can’t be overstated — the enormous cost and time for tariff compliance and analysis … just the number of people, the time, the cost, and the ‘opportunity cost’ that this has taken for suppliers. All that said, suppliers have been working incredibly hard to deliver to our customers. As a manufacturer community, we’ve done an incredible job of that this year, which we’re very proud of.”
According to MEMA’s most recent member survey in August, 42% of suppliers stated they don’t expect to make money in 2025. “Most of that is break even,” stated McCarthy, adding, “There’s certainly been a lot of missed plans across the industry. Some members said tariffs have been ‘body blows’ throughout the year. And it’s led to some cost-cutting initiatives.”
One supplier quoted from the survey shared, “It’s just so hard to plan.” Another said, “We’re dealing with volatility every day. Sales are fine, but with significant hits on cash flow and margins. The complexity of all the tariff’s interacting is overwhelming. Huge people burnout. People are exhausted from dealing with the next tariff hit. A lot of people are focused on non-value added work related to the headlines, rather than to where we all should be.”
There are also questions of how much of a long-term shift the tariff policies present. Will this ultimately just be a near term disruption and price adjustment for some new government revenue to offset deficits? Or does this mean that there’s more to come? Will this be a longer-term story?
Another aftermarket supplier member shared in the survey, “We cannot allow tariffs to distract us from innovation like the pandemic did. And we know we need to focus on all the aftermarket opportunities, the things that lead to growth. It’s one of the [many] frustrations for suppliers — we want to be putting our energy to everything but tariffs.”
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