Editor’s note: On March 27, 2025, U.S. President Donald Trump announced 25% tariffs on auto imports effective April 3.
For those who build cars and trucks, the biggest problem with automotive tariffs isn’t the tariffs themselves. It’s the uncertainty surrounding them.
Make no mistake: tariffs aren’t good for the auto business—not the 25% tariffs on Canadian and Mexican steel imposed on March 12, not the 25% tariffs on all Canadian and Mexican goods, including cars and auto components levied but delayed (for now, until April 2), and not the on-again, off-again additional 25% tariff on Canadian goods.
Consider the metals alone. Steel comprises about half a typical vehicle’s weight at a cost $6,000 to $7,000 without tariffs. Tariffs could add $400 per unit. Aluminum makes up 13% of a vehicle’s weight, but, unlike steel, it’s mostly imported—75% of U.S. supply coming from Canada.
If such tariffs or others were set in stone to be levied forevermore, automakers could regroup around the new normal, grind through a one-and-done planning process taking into account new pricing and demand patterns based on a predictable new cost paradigm, and reconfigure their supply chains all the way down to iron ore and bauxite.
However, uncertainty prevails around both the tariffs and the modern automotive market in general.
A digital strategy for automotive tariffs
Non-tariff surprises and shocks happen, with Tesla’s emergence and the coronavirus pandemic being prime examples. The industry must be able to adapt quickly, and that requires visibility into operations that so many automakers still lack.
Tariffs are, ultimately, just one more compelling reason for the industry to embrace digital transformation.
That’s not for the sake of IT modernization around cloud technologies per se, though doing so does cut costs and boost efficiency around IT functions.
Rather, cloud technologies can help managers and executives grasp the state of affairs and model scenarios such as trade wars and changing demand patterns based on fresh, reliable data from across the company and the supply chain.
Modeling and managing change
Today’s tariff troubles for the automotive industry present a massive opportunity, because neither green screens and spreadsheets nor disconnected on-prem systems can do all that. Here are some digital transformation examples:- Integrated business planning built around cloud ERP supports real-time supply chain visibility and demand forecasting, providing the insights needed to adapt quickly to surprises and disruptions.
- Direct materials sourcing for automotive solutions improve supplier collaboration from product development through specification management, sourcing, and contracting, speeding time to market and time to volume for new product introductions in the wake of tariff-related price pressures.
- Cloud-based finance and performance management systems enable the simulation of financial impacts to tariffs or other potential surprises and the development of cost-mitigation strategies.
- Digital manufacturing systems help reconfigure production lines based on demand shifts due to tariff-related or other cost increases while integrating automation and, increasingly, AI-based insights.
- Cloud-based customer-experience systems help quantify how price changes may affect demand, which in turn impacts marketing and pricing strategies—and, in the end, the supply chain.
Embedded into and layered upon all of the above are increasingly powerful AI capabilities. Examples include copilot-style chat interfaces that let business and operational users run analytical queries without having to bring in data experts.
Rules-based AI—and, now, emerging agentic AI technologies—can analyze massive data sets to identify potential problems well before a human being would take note and then offer paths forward.
An example of scenario planning for tariffs
The conclusions of one AI-powered analytical tool become the inputs for another. For example, if every Ford F-150’s price leaps by $1,000 because of steel and aluminum tariffs:
- How much of that does Ford heap on suppliers versus pass on to consumers?
- How does that affect demand for various models?
- Will consumers stick with Ford but dial back from more expensive XLT or Lariat trim packages to XL or STX versions—or be more likely to switch to Toyota Tacomas and keep the extras?
The answers then cascade through planning for marketing and sales on through to manufacturing and sourcing. That’s just one what-if scenario for one model at one moment in time.
Tariffs are already here, and there may be more coming—or not. That’s uncertainty in a nutshell. Modern IT solutions can’t erase surprises or simplify a dynamic business environment. But they can provide the tools to adapt quickly to the unexpected while increasing efficiency, cutting costs, and speeding decision making along the way. Tariffs or not, that much is certain.
