Podcast: Nearshoring, USMCA, and the future of North American supply chains
Key Highlights
- Supplier sentiment remains negative, but improving clarity helped stabilize production near 15 million units in 2025.
- EV adoption delays have stranded capital, forcing suppliers to rebalance investments and extend ICE strategies.
- Tariffs, trade policy shifts, and USMCA uncertainty continue to drive supply chain risk and cost pressure.
- Nearshoring offers opportunity, but high capital costs and policy volatility are slowing major supplier moves.
In this episode of Great Question: A Manufacturing Podcast, Laura Putre sits down with Mike Jackson to reflect on how suppliers navigated a turbulent 2025 and what the outlook looks like heading into 2026. Their conversation explores shifting trade policies, tariffs, and the evolving role of USMCA, alongside ongoing uncertainty around electrification and EV adoption. They also dig into nearshoring, supply chain volatility, and the financial pressures facing suppliers at every tier. Throughout the discussion, the episode highlights both the challenges confronting manufacturers and the resilience driving the industry forward.
Below is an excerpt from the podcast:
LP: Hi, my name is Laura Putre. I’m the Senior Editor at IndustryWeek, and today we’re talking with Mike Jackson. He’s the Executive Director of Strategy and Research for MEMA, the Motor and Equipment Manufacturers Association. Mike leads the analytic insights for MEMA, including the quarterly supplier barometer, which measures supplier sentiment. And today we’re going to be talking about 2025—taking a look back and taking a peek ahead to the supplier outlook for 2026. Maybe you could just talk a little bit, Mike, about how 2025 went and the last quarter supplier barometer you were seeing there?
MJ: Sure, and I appreciate the opportunity. So listen, our members have really—the supplier community has worked really hard to try and continue to maintain, obviously, supply chains and support production levels. Last year was a tough one, and for a lot of different reasons.
Certainly, the administration, their tariff policies—there’s an intent to support and re-restore, if you will, manufacturing within the U.S., and we clearly support that. But it’s been challenging, and it’s had a significant number of impacts on the supplier community. As a result, due to the fact that so much investment has already been made, supply chains have already been established. And so the idea of shifting something, it makes it very difficult.
Now, last year was expected to be relatively stable, low-15-million-unit range, right around 15 million units. That’s positive. It’s not certainly at its historic high, but that’s in a strong, stable place.
Now, the reality is, though, with Liberation Day, that created a significant amount of concern, and it sent shockwaves through global markets and the industry. And all we can say is, thankfully, as negotiations continued throughout the course of the year, trade agreements with a number of different nations came to fruition. And so this is quite positive. And because what it does is it offered clarity. It certainly created some difficulty and some significant headwinds for many suppliers. But that said, much of the initial shock—the uncertainty index—has come down. It remains elevated, but it was at historic highs earlier in the year, April timeframe last year.
What’s positive is that overall, the market was expected—and there were a number of different forecasts that pulled forecasts down significantly. Fortunately, what did happen is that markets recovered, and so we were able to achieve that 15-million-unit mark last year, according to plan, which is great.
Now, that said, there are some other challenges because policies continue to change. And as a result, one of the concerns that has been pretty challenging is this idea that many suppliers in the industry have been moving very aggressively toward electrification.
And so with this pivot—and I think, look, it’s sound from the standpoint that perhaps one could argue that it doesn’t make sense to choose one technology. It probably would make sense for policy to support a range of technology. So there’s an element of diversification, right? And so that you can accommodate based on market changes and consumer preferences.
What’s important, though, is that with further changes, there were some sunk costs and some stranded capital there, where some organizations, some companies, pursued electrification in a very strong fashion. And yet what we’ve seen now is clearly a delay in terms of the adoption rate for electrification here in the U.S. And so with that—five-year delay, roughly.
Of course, will EVs continue to play a part? Yes, but it’s going to make it—obviously—it’s a transition, and that transition will take place over a longer period of time than what was initially expected. And so that simply means that some of those investments that were already made, or some of the plans that customers have already put out, have changed. Whether that means that some vehicles have been discontinued altogether or didn’t come to market. And so those—all of these different changes, right, create uncertainty. That uncertainty then leads to cost pressure.
And here’s where it really creates a significant amount of pressure. Our fourth-quarter 2025 MEMA OE Vehicle Supplier Barometer, the index came in at 44. And so when we look at the measure, we survey our executives, and we ask them, how is your 12-month outlook, and how has it changed over the prior quarter? And for the 15th consecutive quarter, it came back negative.
So that measure is typically—50 is neutral—and in the fourth quarter, it came in at 44. And so that means six points to the negative. But if there’s a silver lining anywhere, I would say that it started the year in the first quarter, as a result of concerns over tariffs and the rest, at 29. And so each quarter, with greater clarity—I mean, that first quarter of last year represented the greatest degree of uncertainty. So ultimately, what we saw is that it did improve marginally, or it did improve modestly, quarter over quarter, to the point where we’re at here, at 44, for the end of last year.
And so therein lies an incredible, I think, positive. And it really is a case where so many suppliers, you know, took a very difficult situation and leveraged it in positive ways. And you might say, well, how exactly do you do that? Well, what’s pretty remarkable is, you know, as much as—look—we want to make sure that we’re not an island, right? We don’t want the U.S. or North America to be an island. We know that we’re in a global industry. And so if we’re in a global industry, it means that we need to be competitive on a number of different fronts.
And clearly, we know that China is pressing hard, and they’re clearly the leader in this technology for a variety of reasons, leveraging both carrots and sticks in terms of incentives and penalties that have pushed their industry in an aggressive fashion.
All that to say, though, if we go back and look, ultimately a longer tail and a higher share of ICE offerings will contribute to higher margins for a longer period of time. It doesn’t mean that it’s—again—we have some other issues. And part of that comes back to affordability. Consumers are facing some sticker shock heading back into the showroom. And so this represents another pain point, if you will.
Clearly, in the aftermath, post-COVID and supply chain shortages and the rest, manufacturers were incentivized and really said, look, we’ve got limited production, you know, limited supplies. And so we’re going to cater to the most profitable vehicles that we can. And so part of that has continued.
And so obviously we see continued growth across every manner of crossover, every manner of sport utility, as well as on the truck side—things of many derivatives and the like.
LP: How are suppliers feeling about nearshoring and regionalization? Like, I sense that there’s—you feel like there are opportunities, but it’s not easily done, moving production. What’s the outlook there?
MJ: Laura, it’s a great question. And here’s the part of the issue, right? Look, the industry—I mentioned earlier—I talked about the idea that there’s been so much volatility. And the volatility creates uncertainty. That volatility is, okay, so now what do I do? Well, part of the challenge right now is that policies are still being established, trade agreements are still being established, and so this then means that we don’t yet know fully. And so there’s going to continue to be some additional uncertainty, even though we have rising levels of clarity, right?
And so, of course, we also have here negotiations for USMCA this year, and that is fundamental for our members. There’s no question it’s been a very strong agreement for the supplier community, for the industry as a whole. It has been an incredibly strong—you know, some of our members consider it, in quotes, the gold standard, right? It really is. It’s something that really is a very strong tool that has helped foster strong relationships across the U.S., Canada, and Mexico.
So with that, I think the onshoring piece—it’s, look, I think there’s a couple of different elements here. Of course, the idea is to look and see and recognize there are many different geopolitical headwinds at play, at work. One of the challenges is recognizing here—even with the cold spell that we’re facing currently, right? We know that historically that created tremendous supply chain disruption in the South, where such extreme temperatures weren’t accounted for.
And so as a result, it created a lot of headwinds and significant gaps—in particular, it was Texas at the time, but it could be a number of different port cities. It could be a wide range of different factors, right? And so this continues to be a hurdle. And then the point simply is that obviously, if supply chains can be shortened and we can continue to leverage our capabilities here across the U.S.—of course—but across North America to ensure competitiveness, then this is going to, even if there may be higher levels of cost, be crucial just to close off some of the uncertainty and to reduce the timeline, the time lag that is really—
LP: Do you get the sense that suppliers right now are taking a wait-and-see attitude? They’re not making moves yet. They’re just… maybe trying to make sure that their supply chains are moving and, you know, not making any big moves? Well—
MJ: It’s a good question, Laura. I think the reality is that there are opportunities to onshore, and I think, realistically, it’s going to favor those who move more quickly. And some—of course—some suppliers are in a stronger, healthier position, and so they may move a bit more aggressively or maybe more assertively. And that’s to their benefit.
Ultimately, you know, we know that there’s probably this little bit of supply and demand, and so there’s probably more demand than supply in terms of the ability to onshore. And so this represents a little bit of a challenge. And that’s why ultimately it is a positive for those who move more quickly and set plans, of course, you know, with some contingencies, right?
I mean, of course, we don’t have full certainty. But, you know, one of the things that—again—our members have made very clear is that USMCA is beloved. It’s something they’re worth fighting for—you know, they’re fighting for it on behalf of our members. Our members are very clear that it offers tremendous benefit. If anything, if there are areas to improve, it’s really to try and help simplify. It’s really to try and maybe digitalize and streamline. And really, this is kind of the key priorities.
It’s one of those where, again, the industry—it’s a global industry. The effort—it’s asset-heavy, capital-intensive. And so as a result, supplier executives are very keen on saying, okay, look, where can we establish strong patterns, strong supply chains that are going to endure? And how do we continue to protect those and move in a way that puts the U.S. and North America in a very strong competitive position here globally?
LP: When you talk about simplifying, what sort of things are suppliers looking to be simplified in the USMCA agreement? I know it’s very complex.
MJ: Yeah, well, I think even if we look at tariffs and trade, or if we look at USMCA, I think one of the issues is the formulas—obviously, regional value content and the like. It’s all good. But I think the idea, though, is if it can be streamlined in a way where some of these elements can be automated, to the degree that there’s a higher level of automation, a higher level of calculation.
Where, again, the idea is we know that right now—and again, it’s a little bit different situation with tariffs and trade—right now with the tariff environment, if policies change, it requires an entire supply chain and their supply chain to continue to move and to set up systems. And so you’re constantly responding.
And this is part of the reason why so many members indicated, look, we’d love for it to stay the same so we don’t have to spend so much time, or too much time, functioning in a compliance role as opposed to innovating for our customers.
And so this is a really—it’s a sound point, right? The idea is that, look, what they do so well, what they do best, is to innovate and come up with, you know, great technologies and great systems and components that add value for consumers.
LP: Are there any other concerns about weakness or unpredictability in the supply chain? Any specific concerns?
MJ: Well, I would say this—yeah, thank you, Laura. That’s a great question because I think this—we know that, again, policies have shifted, you know, away from electrification. And so with the end of the $7,500 tax credit for EVs, this again changes the calculus for the outlook for electric vehicles going forward.
Now, many vehicles are still going to come to market, and they’re likely at a much more attractive price point, and they’re going to ultimately offer value for consumers in those areas. At the same time, though, there are some that are probably not going to achieve their prior plan under the prior framework of the information they had available at the time. So this represents, again, more uncertainty and potentially a weaker outlook for EVs going forward here over the near term, near-to-middle term. And so what that simply means is that business plans will likely come under pressure for a number of EV programs.
Additionally, then, we know that some folks in the market—there’s an expectation that there could be further disruption on the semiconductor side. And here, kind of in that late first, early second quarter of this year, there could be some further disruption. And again, any type of supply chain constraint represents a risk. And so that’s something that we’re mindful of.
The expectation is, again, there are different forecasts that are out there, but ultimately there is an expectation that this year it’s going to be a little bit cooler. The outlook is probably in the high-14-million range, as opposed to surpassing the 15-million-unit mark. And so that represents, again, relative stability.
But as we mentioned, as we talked about, there’s a tremendous amount of churn and volatility within the portfolio of products that are coming to market and the volumes that were once associated with them. And so this represents a significant pain point for a lot of suppliers because, you know, again, if a program gets delayed six months, typically a supplier doesn’t get paid until that vehicle runs off the assembly line.
And so if they’ve designed and developed technology and content for a product launch, only to have that product launch delayed six months, they’ve incurred a lot of cost. And so now they’re going to carry that for another six months until that vehicle launches. And so this represents, again, another headwind, you know, for a number of supply businesses to look at vehicles that are profitable and meeting customer needs and working with a range of customers that they think is going to be best for their business.
LP: Are there opportunities at all for companies that have made the EV technology investments? Are there other opportunities? Are they finding any other opportunities outside of EV passenger vehicles to reap something from their investment—in the short term, I guess? And then also, are they worried about their other—are the tier ones worried about the tier two and three suppliers? Is there any concern about the financing of those organizations, the smaller suppliers?
MJ: Yeah, well, it’s a great point because one of the concerns, certainly, that we have is some tier supplier distress. If we look at what’s happened across the industry, there’s been this volatility.
We’ve asked members—we talked about this in our latest survey—we asked them whether they’ve faced an increase in distress across the supply base. And what does that look like relative to a watch list? I mean, typically, there’s a watch list that suppliers are tracking. And the idea is, well, look, we’re just trying to make sure that based on shipment, on timing, on delays, on quality—all these different factors contribute to a watch list.
And one of the concerns is that there are over 20% of our members in the light vehicle space—22% of respondents in our last survey—who have effectively a watch list of beyond 6% of their direct material suppliers. And so is it something to be aware of? Of course, it’s something to monitor very closely. And again, how do you do that? You reach out, you do site visits, you offer support. You want that strong communication to be there. But what’s the primary reason that companies are being added to the supplier watch list? It comes back to financial metrics. And so that is the key reason. I mean, more than half of respondents indicated that’s the factor there.
And so what does it mean? It means that there is strain, as I mentioned—15 consecutive quarters, right? And so that is—it’s difficult. And yet, I do think that, again, suppliers have demonstrated a remarkable ability to continue to pivot. And again, I think they’ve weathered a number of storms. And ultimately, I think that they’re going to be in a stronger place here going forward.
LP: Well, thanks so much for talking with me, Mike. I really appreciate it. It’s going to be an interesting year ahead for sure, and it’s a tough business, for sure. And you’re right—the suppliers do have an amazing ability to be resilient.
MJ: You’re absolutely right, Laura. And if I could just close on maybe a little bit more positive note, right? It’s amazing because we just had the Detroit Auto Show, and before that we started off the year at CES. And what’s amazing is the number of suppliers. And look, you don’t have to be at CES to be innovative, but I do think it really just underscores the point that the supplier community really supports the U.S. economy in a remarkable way—representing the largest share of manufacturing, contributing the largest share of manufacturing to the economy. And so this is pretty remarkable.
And ultimately, that innovation—it may not be immediately visible. You may not recognize necessarily the supplier that created the component or the system in your vehicle, and yet it really just continues to fundamentally support and enhance the automotive sector. And so I appreciate the opportunity to talk with you and look forward to all that 2026 has in store.
LP: Thanks so much. All right, you take care, Mike.
About the Podcast
Great Question: A Manufacturing Podcast offers news and information for the people who make, store and move things and those who manage and maintain the facilities where that work gets done. Manufacturers from chemical producers to automakers to machine shops can listen for critical insights into the technologies, economic conditions and best practices that can influence how to best run facilities to reach operational excellence.
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About the Author
Laura Putre
Senior Editor Laura Putre manages IW contributors and covers leadership as it applies to executive best practices, corporate culture, corporate responsibility, growth strategies, managing and training talent, and strategic planning. A former newspaper journalist, Laura has written for Slate, The Root, the Chicago Tribune, the Guardian and many other publications.