Stellantis (STLA, Financial) has announced a temporary layoff of 900 workers at five U.S. plants located in Michigan and Indiana. This decision follows the company's halt in production at plants in Mexico and Canada, citing new tariff policies as the reason.

The situation highlights the complex interconnections within the automotive supply chain across the U.S., Mexico, and Canada. While the idea of manufacturing cars solely in America seems straightforward, the reality involves numerous parts sourced internationally.

President Trump aims to make U.S.-made vehicles more affordable compared to foreign ones. However, U.S. producers are likely to increase prices due to higher costs from tariff-inflated parts. This is basic business strategy to maximize profits, especially when foreign competitors face a 25% tariff.

While the goal of bringing manufacturing back to the U.S. is commendable, the tariffs may not achieve this. Building new plants domestically is costly, and tariffs increase equipment expenses. Additionally, U.S. labor costs are significantly higher than those abroad.

Some manufacturing might return, but many companies could choose to wait out the tariffs. These tariffs are enacted by executive order and can be easily altered by a new president. President Trump's history of fluctuating tariff decisions adds uncertainty for businesses.

Legal challenges also arise, questioning the president's authority to implement extensive tariffs without Congressional approval. The U.S. Constitution assigns taxation powers to Congress, and court rulings could potentially limit these tariffs.

The market is experiencing a sharp decline as the trade war escalates, with China imposing 34% reciprocal tariffs. The longevity of Trump's tariffs remains uncertain, as foreign nations seem prepared to retaliate and may focus on intra-nation trade, potentially disadvantaging the U.S. in the long term.