Dan Ujczo is an international trade and transportation lawyer who works with companies in the automotive and advanced manufacturing sector on day-to-day customs, compliance, and classifying goods issues and “all of the interesting things that may come up in between.” As senior counsel for Thompson Hine LLP, he is involved in negotiations of free trade agreements such as NAFTA and USMCA and is a trade remedy litigator. Previously, he worked in the U.S. government in the early days of homeland security and in the Canadian government on border issues. While most trade lawyers are in Washington, New York, or Chicago, Ujczo is in Columbus, Ohio, “out here where the companies actually are.”
This interview is not only timely and relevant — it preps participants for Ujczo’s AIAG webinar on tariffs and trade scheduled for March 27th. Register for the webinar here.
AIAG: I’ll start with the word creating panic in so many companies: Tariffs. Automotive companies are certainly looking for answers and insight.
Ujczo: There’s no more wondering if tariffs are going to happen — it's today as we speak. Everybody gets caught up in the tone and tenor of the President, but as a company, you can't focus on that. You have to focus more on identifying the targets and topics of this administration and then realizing that what is critical is the timing and tempo. If you understand the timing and tempo and what they were trying to do in terms of the targets and topics, you can put aside the theater. There is a continued view that the President does not want to use tariffs, but there has never been a president in U.S. history who wants to use tariffs more than President Trump.
This administration views itself as transformative. What does that mean? Most of their tariffs fall into the category of tactical or transactional such as leveraged tariffs, negotiating tariffs, security tariffs — some have called them punitive tariffs — meaning you give me what I want or I'm going to use tariffs to get it. The best example of this is in the America First trade policy memo issued on day one around the border and fentanyl. President Trump is using tariffs for national security. He has said that he’s not going to use the military and he’s not going to use foreign aid for leverage, so that leaves access to the insatiable U.S. consumer as a way to achieve his national security objectives.
AIAG: National security initiatives are the purpose behind President Trump’s tariff strategy?
Ujczo: These tactical and transactional tariffs where there’s a quid pro quo will continue to pop up at any time, but those are just the appetizers to the main course, which is coming after April. The core of the strategy is what the President has announced on his reciprocal tariff plan, which is going country by country. There's going to be sectoral tariffs, including automotive and things that will impact automotive like copper, semiconductors, autonomous vehicles. Those are all going to be reviewed in the United States-Mexico-Canada Agreement in the second quarter of this year.
And then the third tariff track is anything to do with China. Everything that started in Trump 1.0 and continued in the Biden administration will reach a fevered pitch in the second quarter. The President is in legacy mode, so he wants to transform the economy using tariffs, he wants a deal with China that will benefit the U.S., and he wants a Nobel Peace Prize by all accounts. You don't have to agree with what the President is doing, but you do have to understand why he’s doing it — and that’s the trap — that companies fall too much for the tone and tenor and for the theater, and they miss the targets, topics, and timelines.
AIAG: Can you put some context around President Trump’s renegotiating of the USMCA?
Ujczo: One argument will be that the Biden administration did not carry forward a lot of the things that we wanted to see implemented during that agreement. And two, that Canada and Mexico have not honored their commitments — in other words, they broke the deal. Now reasonable minds can disagree whether that's happened or not, but one area that's an example — and it ties in with USMCA and the steel and aluminum tariffs — is using Canada and Mexico as a backdoor for China-sourced steel and aluminum. It was the Biden administration back in July — in response to calls from Democrats and Republicans and the steel workers labor unions — that said, “Hey, we have to start looking more at this steel that's allegedly from Mexico that's going into our automotive sector because we actually think that's from China and Korea.” And the reality is there was a significant question around that.
We had already put strict rules on Mexico that were just coming into force, but what the Trump administration says is, “All these countries made deals with us, and we're not seeing the results, so we're pulling back the special arrangements that we made with each of them, and we're going to start over.”
It’s the same thing with reciprocal tariffs. Trump is going to look at every country with which we have a trade deficit line by line, and if their tariffs are higher and we're lower, they're either going to have to come down to our level to let our goods in or we're going up to their level. It sounds fair. How do you argue with that? It sounds good until you look at an example like Malaysia, which has a 52% tariff on U.S. rice. Our tariff on Malaysian rice is 4%. But how much rice are we really going to sell to Malaysia? There's also about 160,000 tariff lines where we actually are higher than our competitors — sugar and ethanol being great examples of that. Nobody comes to these trade discussions with a clean t-shirt.
AIAG: What’s your best advice for automotive companies?
Ujczo: You have to understand what they're trying to do, and if you get that, then it’s actually not that hard to figure out. When they put something in writing and say, “This is what we’re going to do,” you have to believe it. The rest of it's theater. Also, don’t believe everything you read. Whenever possible, watch the original tape.
AIAG: There’s a recent stat from Bloomberg that predicts the latest tariffs could cut profits for automotive manufacturers by $3,500– $10,000 per vehicle.
Ujczo: There will be a cascade of effects throughout the supply chain. First, there will be an impact on the suppliers themselves. The farther down the chain that you are, you're not able to pass those costs to the next tier of suppliers, and ultimately, to the OEMs. You're going to see the immediate impact on lower-tier suppliers. We may see a significant disruption in the supply base, and that's going to require OEMs and Tier 1s to work out deals with those strategic suppliers. The first hit is coming to the supply base in just trying to keep the lights on through these tariffs because there's really nowhere else to pass on the costs.
Of course, those deals cut within the supply chain have to go somewhere — and that would ultimately be to consumers. The administration would respond that you're only looking at one side of the coin — that you have to pay attention to what they're doing in their economic agenda — which is extending the tax cuts, unleashing America's energy, reducing regulations, etc. Every boardroom is trying to do the math on the tariff risk versus the potential benefit of the other measures. But there's just so much uncertainty across the board, particularly because the carrot side of the equation relies on Congress with one of the narrowest margins in history.
There's inherent risk in President Trump’s strategy in that it's never been done before — using tariffs, the tax cuts, and regulatory reform together. But what increases the risk profile is that if one thing goes out of order, it could potentially flaw the entire system. The highest risk factor is whether Congress is actually going to get that economic agenda through with the narrow majorities they have. And if they can't give the benefits to the companies, the costs of the tariffs will be born almost entirely by the American public.
AIAG: What will your upcoming AIAG webinar address?
Ujczo: Your questions framed it perfectly. One is cutting through the tenor and tone and focusing more on the targets and topics and the timelines, which hopefully will provide a framework so companies can understand how to put the facts into an operating framework from which to assess the risk. We will look at the strategies for dealing with the potential tariff environment that's coming and view it in a holistic way. So much of what we're getting are pieces and parts, but we need the entire framework that will then help automotive companies with their overall strategy.
Carla Kalogeridis is AIAG’s e-news editor.