Government Policy

1. Prepare for tariff permanence: The 25% tariff structure is reshaping supply chains for the long term. Evaluate country-of-origin strategies, customs classifications, and contract reopeners now rather than waiting for policy clarity that may not come.
2. Plan for regulatory divergence: If California’s waiver authority is restored, OEMs will face dual standards again. Maintain flexibility in product planning to accommodate both lenient federal rules and stricter state requirements.
3. Adjust EV economics without subsidies: Federal tax credits are gone. Pricing strategies, lease structures, and consumer financing programs must adapt to a market where EVs compete on merit rather than incentives.

Tariff policy may loom large throughout our report, but heightened concern over USMCA renegotiations, CAFE standards, and the elimination of the EV tax credit suggests an industry facing interconnected policy pressures. USMCA renegotiations (49%) have surged to become the second-highest concern, up 30 percentage points from 2025. This dramatic increase reflects growing recognition that the 2026 review will likely involve substantive renegotiation rather than routine affirmation, with potential changes to rules of origin, labor-value content rules, and tariff treatment for vehicles and parts moving within North America.

NHTSA’s proposed CAFE revisions and efforts to revoke California’s Clean Air Act waiver (44%) have jumped 25 percentage points from 19% last year, making it the third-highest concern. This surge reflects the high stakes of pending litigation that will determine whether the industry operates under a single, lenient federal standard or returns to a dual-standard world in which California and aligned states effectively dictate national vehicle technology plans.

Elimination or modification of EV tax credits (41%) has increased 22 percentage points from 19% last year, a counterintuitive rise given that the credits were already terminated in September 2025. This suggests the full market impact is only now becoming clear, as companies adjust pricing strategies and witness consumer response to EVs competing without subsidies.

Reshoring initiatives (15%) have declined by 10 percentage points from 25% last year, a result of tariff policies that have already forced reshoring decisions, making additional policy support less critical. The auto loan interest deduction (10%) and reduced regulatory oversight of labor practices (9%) register minimal concern, suggesting these policies are viewed as either insufficiently impactful or unlikely to materially affect business operations.

The data reveals interconnected concerns: tariff policy determines costs, USMCA negotiations determine where production can occur cost-effectively, CAFE standards determine what must be built, and the loss of EV credits affects whether consumers will buy what’s produced.

With a 79% response rate, tariff policy has achieved what few policy issues do: acceptance as permanent infrastructure rather than temporary disruption (up from 71% in 2025). The answer to which government policy matters most has not changed; what has changed is the industry’s understanding of tariffs as permanent infrastructure rather than temporary disruption.

The 25% tariff structure on imported automobiles and auto parts has fundamentally altered where vehicles are built, how supply chains are configured, and which markets remain profitable to serve. By policy design, imports from USMCA-compliant Mexico and Canada receive favorable treatment, effectively rewarding highly localized North American supply chains and penalizing reliance on Europe and Asia. This creates direct incentives for investment decisions worth billions of dollars.

The practical impact extends across all business functions. For manufacturing, tariffs determine plant location decisions and capital allocation. In procurement, they drive country-of-origin strategies as companies analyze whether sourcing components from different jurisdictions changes total duty exposure. For legal teams, they trigger contract reopeners as parties argue over who bears unexpected costs, customs classification disputes as importers and CBP disagree about which tariff codes apply to complex assemblies, and trade remedy litigation challenging the legal basis for certain duties.

The intersection with other policy priorities is direct. USMCA renegotiations at 49% concern matter precisely because they could alter the tariff-favored status of North American production. CAFE standards at 44% concern determine what vehicles must be built, but tariffs determine where they can be built profitably. The elimination of the EV tax credit at 41% affects consumer demand, but tariffs affect whether companies can price vehicles competitively, even with strong demand.

Concern from 4 in 5 respondents reflects industry recognition that tariff policy has become the foundational variable around which all other strategic decisions must be structured. Companies that assumed tariffs would be negotiated or that they would be temporary have learned otherwise. The question is no longer whether this trade policy framework will persist, but how to optimize operations within constraints that show no signs of relaxing.