1. Prepare for cascading cost pressures: Tariffs may accelerate consolidation and financial distress across the supply chain. Contracts should be reviewed for fixed‑price commitments, price reopeners, force majeure provisions, and tax or tariff‑allocation terms.
2. Diversify beyond China for critical inputs: Geopolitical risks affecting battery materials and semiconductors may necessitate multi‑jurisdictional sourcing strategies and secure long‑term supply arrangements.
3. Review contractual EV supply commitments: Careful assessment of risk‑allocation provisions in EV supply agreements may help manage contract exposure.

Concern over geopolitical tensions (52%) has surged 23 percentage points from 29% last year, becoming the second most pressing issue among respondents. When combined with semiconductor and critical minerals availability (30%), geopolitical supply‑chain disruption now approaches the level of tariff‑related concern, underscoring how trade policy, resource access, and supply continuity have become increasingly interrelated. These pressures coincide with ongoing EV production cutbacks (44%), which remain a significant concern despite a modest two‑percentage‑point decline from last year. Together, these conditions have contributed to contract disputes involving purchase obligations and tooling cost recovery in EV programs.

At the same time, concern over rising bankruptcy risks (26%) reflects increasing financial strain across the industry’s supply chain. Tariffs, raw‑material cost volatility, and other cost pressures are contributing to distress, particularly where existing contractual frameworks offer limited flexibility to accommodate sudden cost changes. Respondent concern regarding legal challenges to supply agreements remains stable at 22%, reflecting a persistently active area of risk, rather than an emerging trend. By contrast, concerns regarding compliance with forced‑labor and human‑rights laws (6%) have declined from 12% last year, potentially reflecting more mature compliance frameworks or the displacement of longer‑term regulatory risk by more immediate financial pressures.

Tariff‑driven cost pressures account for 79% concern in this year’s survey, up 8 percentage points from last year’s already dominant 71%. 

The significance of tariffs lies less in their ranking and more in their scale. J.P. Morgan estimates that combined tariffs on vehicles and parts will total approximately $41 billion in the first year. Within integrated supply chains, these costs are challenging to address through pricing adjustments alone due to contractual structures and commercial constraints. The resulting effects include shifts in cost allocation, changes in sourcing and production strategies, and continued consolidation trends consistent with established economic dynamics.

From a legal perspective, these conditions present three critical challenges: interpreting tariff‑allocation provisions in agreements drafted under materially different economic assumptions, managing pricing and cost‑recovery disputes arising from sustained cost volatility, and navigating increased counterparty financial distress across the supply chain.

Together, these findings reflect a shift toward sustained structural complexity in automotive supply chains, with legal risk increasingly shaped by how existing contract frameworks respond to prolonged cost, trade, and production variability.