A New Supply Chain Flashpoint: Tariffs and Critical Minerals

On April 15, 2025, President Trump signed an Executive Order launching a Section 232 investigation under the Trade Expansion Act. The goal? To assess national security risks tied to U.S. dependence on imported critical minerals like rare earths, gallium, and germanium.

This comes on the heels of China tightening its grip on exports of these key materials—used in everything from EV motors to batteries—leading to cost increases of 15–20%. At the same time, the U.S. adjusted tariffs on Canada and Mexico to protect the automotive sector. These updates exempt USMCA-compliant goods, impose 10% tariffs on some Canadian energy and potash, and uphold 25% tariffs on non-compliant goods.

It’s a pivotal moment for automakers trying to navigate a world of global disruptions and shifting trade policy.

What’s Under Investigation?

So, what’s actually under the microscope?

The Section 232 probe focuses on processed critical minerals and related products, including:

Rare earth elements for EV motors, sensors, and infotainment systems
Magnets and specialty alloys vital for batteries and electric drivetrains
Strategic metals used in radar, AI chips, and advanced electronics

These aren’t fringe materials—they’re the backbone of modern vehicle technology. The investigation could wrap up in 90 to 270 days and may result in new tariffs. If that happens, existing rates (like China’s 245% tariffs) could be replaced, potentially pushing manufacturers to rely more on domestic sources.

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China Tightens the Tap on Critical Exports

Over the past several months, China has increased export restrictions on materials like gallium, germanium, antimony, and heavy rare earths. The recent suspension of rare earth magnet exports—essential for EV motors—has hit supply chains hard.

Industries already feeling the squeeze:

Automotive: EV battery and motor costs are on the rise
Semiconductors: Shortages are hitting auto chip supplies
Aerospace and defense: Radar systems and advanced tech are under pressure

With China processing around 85–90% of the world’s rare earths, these bans aren’t just policy changes—they’re leverage. U.S. automakers are facing real-world consequences, from rising production costs to job losses. Stellantis, for instance, recently cut 1,000 jobs across Michigan and Ohio. Ferrari raised U.S. prices by 10%.

Canada/Mexico Tariff Adjustments: A Lifeline for Supply Chains

Thankfully, not all the news is bleak. On March 6, 2025, the U.S. adjusted tariffs on Canada and Mexico. Goods that meet USMCA rules are exempt, helping companies like GM and Ford, which source 20–30% of their parts from those neighbors.

That change has helped stabilize production, even amid border delays. But for suppliers who don’t meet USMCA standards, the full 25% tariff still applies—adding more cost pressure.

It’s a short-term relief for the 1,005,700 people working in U.S. motor vehicle and parts manufacturing (as of March 2025). But it doesn’t solve the deeper problem: critical minerals shortages.

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What Happens If New Tariffs Kick In?

If the Section 232 investigation ends with new tariffs, automakers could be in for a rough ride. Here’s why:

Costs could spike—EV components might jump by $5,000 to $10,000 per vehicle
Bottlenecks may grow, especially since the U.S. doesn’t yet have enough domestic alternatives
The pressure to source locally is real, but new projects like MP Materials’ rare earth mine in California won’t be ready overnight

Sure, the Canada/Mexico tariff adjustments offer some breathing room—especially for USMCA-compliant supply chains—but if China’s restrictions stay in place and Section 232 tariffs take effect, delays and price hikes for EVs could become the new normal.

Who’s Most at Risk?

Manufacturers heavily focused on EV production, which rely more on critical minerals and magnets
Tier 2 and Tier 3 suppliers with limited flexibility in shifting sourcing or operations
Startups and smaller manufacturers without the vertical integration or supplier leverage to quickly adapt

Long-Term Outlook: Domestic Opportunity

These policy shifts could spark a new era of domestic production. Hyundai, for example, is investing $21 billion to expand U.S. EV infrastructure and produce 1.2 million vehicles per year.

That’s good news for jobs.

Timpl Insight: What Manufacturers Should Do Now

Stay informed: Track Section 232 updates and tariff timelines
Review sourcing plans: Explore reshoring or nearshoring for minerals and parts
Plan for labor shifts: Be ready to scale up or down based on production changes—Timpl can help you stay agile

The supply chain landscape is shifting fast. Proactive manufacturers who adapt now will be better positioned to stay competitive—and keep their workforce strong.

Need Workforce Support?

At Timpl, we work closely with manufacturers to build flexible, reliable teams that can weather economic shifts, production surges, and supply chain disruptions. Whether you need temp labor, skilled operators, or full-time hires, our auto and EV manufacturing expertise helps you move faster with confidence.

Let’s talk about how we can support your workforce strategy—before the next disruption hits.

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Want help navigating workforce shifts tied to supply chain policy? Talk to our team about building an agile hiring plan that works in today’s environment.

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