U.S. President Donald Trump on Tuesday will soften the blow of his auto tariffs through an executive order mixing credits with relief from other levies on parts and materials, after automakers pressed their case with the administration.
The changes to Trump’s 25 per cent vehicle tariffs will provide auto companies with credits for up to 15 per cent of the value of vehicles assembled domestically. These could be applied against the value of imported parts, allowing time to bring supply chains back home, a senior administration official said.
The official said this would work out to allowing automakers to import duty-free parts worth about 3.75 per cent of the sticker-price value of domestically produced cars they sell in the first year, and 2.5 per cent in the second year. The benefit, retroactive to April 3, phases out in the third year to push companies to move parts production to the U.S.
Moreover, autos and parts subject to the those tariffs would no longer be subject to Trump’s other tariffs, including 25 per cent duties on Canadian and Mexican goods (which are on but don’t apply to Canada-U.S.-Mexico Agreement-compliant goods), 25 per cent levies on steel and aluminum, as well as 10 per cent duties applied to most other countries.
The change also extends a duty-free exemption for North American parts that comply with the US rules of origin.
“If you build your car elsewhere and bring them in on a ship, right, you are going to be at a very, very big disadvantage,” the official said.
In the case of the metals tariffs, automakers would pay either the vehicle tariff or the steel and aluminum tariffs, whichever is higher, the official said.
A White House official said, however, that the tariff relief would not apply to Chinese parts, which will continue to be subject to Trump’s latest tariffs of at least 145 per cent in addition to any prior duties.
The White House said later Tuesday that Trump had signed a proclamation to adjust the tariffs in the manner that the senior official had earlier described.
Trump first slapped a 25 per cent tariff on all vehicle imports to the United States earlier this month.
White House press secretary Karoline Leavitt didn’t provide any details on what, precisely, will be in the executive order about auto tariffs that U.S. President Donald Trump is expected to sign later Tuesday.
Trump is travelling to Michigan on Tuesday to commemorate his first 100 days in office, a period that the Republican president has used to upend the global economic order. The state is home to the Detroit Three automakers and more than 1,000 major auto suppliers.
The move to soften the effects of auto levies is the latest by his administration to show some flexibility on tariffs, which have sown turmoil in financial markets, created uncertainty for businesses and sparked fears of a sharp economic slowdown.
Rollbacks will have minimal impacts: experts
Sam Fiorani, an auto industry analyst at AutoForecast Solutions, says reducing some of the stacked auto, metal and general tariffs will likely come as a bit of a relief to the industry — even if they’re still paying considerable tariffs.
But overall, he says these rollbacks are small and won’t likely change much, nor will they do anything to stabilize the uncertain economic times with which automakers have been grappling.
“These are moving targets, so there’s always a new question every time anybody sends an email, opens their mouth, whatever it is. So … concrete answers just aren’t there yet and simply signing an executive order doesn’t do much more,” Fiorani said.
And while some of the rollbacks attempt to give automakers some time to bring manufacturing back to the U.S., Fiorani says the measures still don’t take into account just much time and money it really takes to change supply chains.
The measures will also be of little benefit to Canada, Fiorani says, given they are targeted to bring auto manufacturing to the U.S. specifically.
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Flavio Volpe, president of the Automotive Parts Manufactures’ Association, said partial rollbacks like these are not good enough in such an interconnected industry.
“Partial measures that eat profits up and risk insolvency are not acceptable, the right level is zero tariffs,” Volpe told CBC News in an email.
So far, Canada’s auto industry has received partial carve-outs from Trump’s tariffs for vehicles compliant with the Canada-U.S.-Mexico Agreement on trade, called CUSMA. The current duties only hit the value of the non-American parts of vehicles finished in Canada.
Trump has claimed Canada is taking American automobile jobs, but the two countries have been developing the industry in tandem since the early 1900s. Integration was deepened with the 1965 Auto Pact trade deal between Canada and the U.S.
Automakers respond positively, but volatility remains
General Motors CEO Mary Barra, Ford CEO Jim Farley and Stellantis chair John Elkann praised the planned changes ahead of Trump’s signing of the new order.
“We believe the president’s leadership is helping level the playing field for companies like GM and allowing us to invest even more in the U.S. economy,” Barra said.
Farley said the changes “will help mitigate the impact of tariffs on automakers, suppliers and consumers.”
Elkann said Stellantis looked forward to continued collaboration with the Trump administration “to strengthen a competitive American auto industry and stimulate exports.”
But uncertainty remained as GM delayed its earnings call that had been scheduled for Tuesday morning to Thursday because of the expected change in trade policy, even as it reported strong quarterly sales and profit.
Last week, a coalition of U.S. auto industry groups urged Trump not to impose 25 per cent tariffs on imported auto parts, warning they would cut vehicle sales and raise prices.
Trump had said earlier he planned to impose tariffs of 25 per cent on auto parts no later than May 3.
“Tariffs on auto parts will scramble the global automotive supply chain and set off a domino effect that will lead to higher auto prices for consumers, lower sales at dealerships and will make servicing and repairing vehicles both more expensive and less predictable,” the industry groups said in the letter.
The letter from the groups representing GM, Toyota, Volkswagen, Hyundai and others was sent to U.S. Trade Representative Jamieson Greer, Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick.
“Most auto suppliers are not capitalized for an abrupt tariff induced disruption. Many are already in distress and will face production stoppages, layoffs and bankruptcy,” the letter added, noting “it only takes the failure of one supplier to lead to a shutdown of an automaker’s production line.”
