LEAR CORP

Current report

•International trade policies, such as tariffs and sanctions, could adversely affect our financial performance.

Current report

Due to the interconnectedness of the global economy, policy changes in one area of the world can have an immediate and material adverse impact on markets around the world. Changes in international trade policies, including: (i) changes to existing trade agreements; (ii) greater restrictions on free trade generally; and (iii) significant increases in customs duties and tariffs imposed by any country, including those already imposed by the United States and retaliatory and other actions by other countries, can adversely affect our financial condition and operating results.

Current report

Since his inauguration in January 2025, President Donald J. Trump has announced various tariffs that impact industries around the world, including the automotive industry. As of the date of this Report, the tariffs announced by the current U.S. administration that could adversely impact our business include:

Current report

•25% tariff on imports of automobiles and certain automobile parts into the United States from all countries (with respect to automotive parts, the "Automobile Parts Tariff"). Automobile parts that meet specific rules of origin under the United States-Mexico-Canada Agreement ("USMCA" and "USMCA-qualifying") are currently exempt from the Automobile Parts Tariff; however, this exemption may be modified to include only the U.S. content of USMCA-qualifying automobile parts.

Current report

•25% tariff on all imports into the United States from Mexico and Canada except for USMCA-qualifying goods (the "Mexico/Canada Tariff"). The Mexico/Canada Tariff does not apply to goods subject to the Automobile Parts Tariff.

Current report

•25% tariff on all steel and aluminum imports into the United States from all countries (the "Steel/Aluminum Tariff"). The Steel/Aluminum Tariff does not apply to goods subject to the Automobile Parts Tariff or the Mexico/Canada Tariff.

Current report

•Incremental 20% tariff on all imports into the United States from China (the "China Tariff").

Current report

•10% tariff on all imports into the United States from all countries that are not subject to the Automobile Parts, Mexico/Canada or Steel/Aluminum Tariffs. Country-specific tariffs were to have replaced the 10% tariffs effective April 9, 2025, but have been paused for ninety days with the exception of China (the "Reciprocal Tariffs"). The China Reciprocal Tariff is 125% and is additive to the China Tariff discussed above.

Current report

The actual impact of these tariffs on our business, financial condition and results of operations is subject to a number of factors that are not yet known or are subject to change, including the effect such tariffs may have on consumer demand and global automotive production volumes, the effective dates and duration of such tariffs, future changes in the amounts and scope of such tariffs, the potential withdrawal of such tariffs in whole or in part, the scope and effective date of any exemptions to such tariffs, any modification to existing exemptions to the tariffs, countermeasures that the target countries may take in response to such tariffs, and the impact such tariffs may have on our customers and our supply chain. We expect the ultimate cost of tariffs to be recovered from our customers and are implementing certain actions, and considering others, to counter the potential impact of such tariffs on our business, financial condition and results of operations, including, without limitation, participating in industry efforts to inform the U.S. and certain foreign administrations and legislatures of the impact of current trade and tariff policies on the automotive industry and evaluating our production footprint and alternatives in our supply chain. However, we can provide no assurance that we will be successful in recovering such costs from our customers or that any of these mitigating actions will be successful or will not disrupt and deteriorate our business, operations and financial performance.

Current report

In addition to potential increases in customs duties and tariffs in the United States and other countries, the USMCA is subject to renewal in 2026. There can be no assurance that the USMCA will be renewed or, if renewed, any newly negotiated terms in the USMCA will not adversely affect our business. Also, China presents unique risks to U.S. automotive manufacturers due to the strain in U.S.-China relations and the level of integration with key components in our global supply chain. It remains unclear what additional actions the current U.S. administration may take with respect to trade issues involving China and other countries.

Current report

Further, the U.S. and other governments could impose additional sanctions or export controls that could restrict us from doing business directly or indirectly in or with certain countries or parties, which could include affiliates (e.g., China has imposed tariffs and taken other retaliatory actions in recent weeks). The current trade environment could impact the status of other trade agreements between the United States and countries other than Canada and Mexico, including, without limitation, the Dominican Republic-Central America-United States Free Trade Agreement. Any of the above factors could impact our supply chain, as well as our operations, and adversely affect our financial condition and operating results.