President Trump signed an executive order on Tuesday that will reverse some tariffs on automakers, according to administration officials, removing levies that Ford, General Motors, and others have complained would harm U.S. manufacturing by raising production costs and squeezing profits.
The adjustments will tweak Mr. Trump’s tariffs so that carmakers who pay a 25% tax on auto imports are not subject to additional levies, such as those on steel and aluminum, officials said in a teleconference with reporters Tuesday.
Carmakers will also be eligible for tariff reduction on a percentage of the cost of imported components, however these advantages will be tapered down over the following two years.
On Tuesday, before leaving the White House, Mr. Trump stated that the government wants to assist automakers “enjoy this little transition, short-term.”
“If they can’t get parts, we didn’t want to penalize them,” he told me.
The move to narrow the scope of the tariffs is the latest indication that the Trump administration’s plan to put steep tariffs on practically all trade partners has caused upheaval and economic uncertainty for American businesses. Even with the concessions revealed Tuesday, analysts say the administration’s plans would raise car costs by thousands of dollars and jeopardize the financial health of automakers and suppliers.
General Motors abandoned an earlier prediction for strong profit growth this year on Tuesday due to the uncertainty generated by President Trump’s trade policy. The manufacturer, which sells more automobiles in the United States than any other corporation, stated that any profit forecast is a “guess.”
The carmaker also postponed a conference call with financial analysts to discuss its first-quarter results, citing the Trump administration’s predicted shift in tariff policy.
Mr. Trump is scheduled to sign the order on Tuesday, bringing the reforms into force. The directive would come on the same day that Mr. Trump is expected to go to Michigan, home to America’s top automakers, for a speech commemorating his 100th day in office.
Automakers have welcomed any tariff reductions, claiming that they will boost car costs, reduce sales, and jeopardize their financial sustainability. However, the actions will keep in place a 25% tariff on imported autos, which went into force on April 3, as well as a duty on auto parts, which goes into effect on Saturday. This will still result in thousands of dollars in price increases for new and used automobiles, as well as increased repair and insurance premium costs.
The action comes only weeks after the government spared smartphones, laptops, semiconductors, and other devices from its harsh China tariffs, citing fears from corporations such as Apple that the import duties would cause prices for U.S. consumers to soar.
On Tuesday, Commerce Secretary Howard Lutnick stated that the adjustments were the result of direct talks with domestic automakers, and that the government had been in “constant contact” with the firms to assess their operations and ensure that the policy was absolutely appropriate.
“Donald Trump and his presidency are going to bring domestic auto manufacturing back,” says Mr. Lutnick.
Analysts believe that while the policy may provide some respite to automakers, the Trump administration’s tariffs will continue to have a significant financial impact.
In a call with reporters on Tuesday, a Commerce Department official indicated that manufacturers will be excluded from the 25% duty on imported auto parts for the next year, which is equivalent to 15% of a car’s retail price. In the second year, the exemption will be available for 10% of a car’s retail price, but it will be removed in the third year.
With tariff reimbursement for vehicle parts, for example, analysts at Barclays projected that a $50,000 automobile might include $1,875 in parts that would be tariff-free in the first year.
The exception buys carmakers some time, according to Lenny LaRocca, KPMG’s U.S. automotive sector head.
However, automakers and suppliers argue that three years is not enough time to restructure their production operations. Even if they do, companies will be unable to manufacture many components as inexpensively in the United States as they can overseas, resulting in higher pricing.
The new restrictions also provide an exemption for parts imported from Canada and Mexico that conform with a deal struck by President Trump during his first term. Both nations are key suppliers to the United States car industry.
Even automobiles made in the United States generally include significantly more foreign parts than would be protected by an exemption. Most automobiles also have components from Japan, South Korea, or China that will be subject to taxes.
