In a reversal, President Donald Trump moved Tuesday to prevent some tariffs from layering on imported vehicles and to reduce duties on imported auto parts for automakers building vehicles in the United States.
The 25% tariffs on vehicles and certain auto parts will not be stacked on top of aluminum and steel tariffs — and tariffs on Canada and Mexico, according to an executive order Trump signed. Additionally, he issued a proclamation granting automakers credit to offset 25% duties on imported auto parts that go into vehicles assembled in the United States.
The actions took place before Trump’s visit on Tuesday afternoon to Macomb County, home to many autoworkers, to mark his first 100 days in office. White House and Commerce officials who weren’t permitted to speak publicly on the proclamation said the deal will offer the certainty the auto industry has requested on trade policy so companies can make investments to move parts production into the country and boost U.S. job creation.
Some in the industry, however, aren’t so sure.
In late March, Trump signed a proclamation ordering 25% tariffs on fully imported vehicles coming into the United States that took effect April 3 and on more than 100 categories of auto parts ranging from engines and steering wheels to hinges and more. Those duties are set to go into effect on Saturday. The auto tariffs originally were said to stack on top of existing tariffs, prompting the industry to warn that the policy would increase vehicle prices.
Under the executive order, the 25% auto tariffs implemented under Section 232 of the Trade Expansion Act will remain in place. But they no longer will stack on top of the 25% tariffs on aluminum and steel that Trump signed earlier this year, retroactive to March 4. Additionally, the vehicle levies won’t stack on the 25% duties on goods from Canada and Mexico. Trump already granted the auto sector an exemption from the latter tariffs for vehicles and parts that comply with the U.S.-Mexico-Canada trade agreement he signed in 2020.
Other tariffs — like the 20% on China instituted in response to concerns around the synthetic opioid drug trade — will remain stacked.
Additionally, the proclamation offers an offset on tariffs on automobile parts used in U.S.-assembled vehicles worth up to 3.75% of the manufacturer’s suggested retail price for one year, according to a White House fact sheet. After that, the credit falls to 2.5% until May 2, 2027, after which there will be no offset.
The offset is not a reimbursement, according to the White House and Commerce officials, but a credit to reduce the tariff paid. If a manufacturer builds a car in the United States that has 85% U.S. or USMCA content, the manufacturer effectively will not owe tariffs on that vehicle’s production for the first year, according to the fact sheet.
The credit is only available to the final producer of the vehicle, not suppliers. But automakers can determine the parts to which they allocate the offset, the officials said.
Trump had insisted in response to national security concerns and the need for a robust domestic supply chain that the auto tariffs would increase U.S. production, create well-paying manufacturing jobs and increase federal income to lower taxes and pay off national debt.
But automotive executives, suppliers and analysts raised concerns that the tariffs would create supply-chain instability and result in increased vehicle prices, lowering demand for new cars, SUVs and trucks. Plus, it can take years to retool plants or construct new ones.
Two weeks ago, Trump said he was looking at “help” for the auto industry to give companies “a little bit of time” to move manufacturing to the United States from elsewhere. In March, Trump had described the original auto tariffs as “permanent, 100%.”
An analysis from East Lansing’s Anderson Economic Group consulting firm estimates a significant benefit from a credit on imported parts up to 3.75% of the wholesale price of a vehicle, CEO Patrick Anderson said. For vehicles like a Chicago-built Ford Explorer SUV that could see tariffs of $2,500 to $4,000, the move might offer $900 in relief, Anderson said. For vehicles more vulnerable to tariffs, like a Texas-built GM pickup truck that might see $10,000 in added costs from tariffs, the relief could be closer to $2,000, he said.
“It is significant, it is beneficial, but it does not eliminate the tariff,” Anderson said. “It would reduce the ability of consumers to buy American cars. We would still estimate that there would be a drop in auto sales, but it wouldn’t be as large as the 1 million unit sales, which is a lot,” if the tariff remained as they were originally introduced.
Anderson said the policy moves toward an environment that could result in encouraging the manufacturing of more vehicles in the United States and some additional manufacturing jobs in auto states.
“A year is not long enough,” Anderson added. “But it is a step toward encouraging this.”
Some lawmakers, however, were quick to call the measures insufficient.
“It’s not enough relief for the autos,” said U.S. Rep. Haley Stevens, D-Birmingham. “And frankly, we need to stop waking up to new announcements every single day on tariffs. The auto industry, small businesses and manufacturers, they absolutely rely on certainty. They need rules of the road. We got a trade agreement called the USMCA, and that needs to be a part of any type of tariff policy that comes down on our North American trading partners, particularly Canada.”
The American Automotive Policy Council, a lobbying group representing the Detroit Three automakers, said it would review the actions to assess how effectively they mitigate the impact of tariffs on U.S. automakers, the supply chain and consumers.
“American automakers Ford, GM, and Stellantis appreciate the administration’s clarification that tariffs will not be layered on top of the existing Section 232 tariffs on autos and auto parts,” Matt Blunt, AAPC president, said in a statement. “Applying multiple tariffs to the same product or part was a significant concern for American automakers, and we are glad to see this addressed. We also welcome the import adjustment offset and the recognition of the significant economic contributions of U.S.-based automakers.”
General Motors Co. CEO Mary Barra and Ford Motor Co. CEO Jim Farley, in statements late Monday, welcomed relief measures on the tariffs and said that they would continue conversations with the administration to ensure support for a growing U.S. auto industry. Farley challenged rivals to match Ford’s manufacturing ratio in America, where it builds 80% of the vehicles it sells in the country. Barra said the actions would level the playing field and allow GM to invest more in the U.S. economy.
The Detroit automaker reported Tuesday $2.8 billion in net income in the first quarter but warned that the potential impact of tariffs makes it difficult to predict profits for the rest of the year. GM said adjusted pre-tax earnings in the first quarter hit close to $3.5 billion, and earnings per share of $2.78 outpaced analysts’ expectations by 12 cents, thanks in part to consumer panic-buying in anticipation of potential price hikes. The company told investors to disregard its initial profit guidance of $13.7 billion to $15.7 billion in projected profits for the year, saying that tariffs make those estimates unreliable.
Stellantis NV Chairman John Elkann on Tuesday also praised the promise of relief for the industry in a statement: “Stellantis appreciates the tariff relief measures decided by President Trump. While we further assess the impact of the tariff policies on our North American operations, we look forward to our continued collaboration with the U.S. Administration to strengthen a competitive American auto industry and stimulate exports.”
The revised tariff proclamation is an improvement over the stacked duties, said Sheldon Klein, who represents suppliers at law firm Butzel Long. But a basic problem remains: “The world may change tomorrow,” he said.
Companies can adapt if they have a sense of the longer-term roadmap for tariffs, Klein said. But as it stands now, Klein said, “it’s just impossible to plan” — including whether to shift production or build new factories — especially for suppliers with large foreign footprints.
During a White House briefing Tuesday morning, Treasury Secretary Scott Bessent said the deal comes after meetings between Trump and foreign and domestic vehicle producers.
“He’s committed to bringing back auto production back to the U.S.,” Bessent said. “We want to give the automakers a path to do that quickly, efficiently, and create as many jobs as possible.”
He added that national and economic security remain motivating factors for pushing automakers — and companies from other manufacturing sectors — to reshore their production to the United States.
Trump believes that “economic security is national security, and national security is economic security,” Bessent said in responding to a question about the auto tariffs. “We saw during COVID that our supply chains got cut off, and we need to bring back a lot of those supply chains, whether it’s in semiconductors, medicines, steel. We have to onshore those. It’s a combination of making trade free and fair, and remedying this gaping national security hole that (Trump) was left with.”
Last week, auto industry trade groups representing automakers, dealers and suppliers sent a joint letter to top Trump administration officials urging relief from tariffs on auto parts set to take effect next month.
Six of the auto industry’s biggest lobbying groups signed onto the letter, an uncommon unified voice against 25% import taxes set for May 3 on more than 100 categories of auto parts, ranging from engines to steering wheels to hinges and more. The organizations warned of supply chain failures and job losses that would trigger disruptions to the U.S. auto industry and economies of states like Michigan that rely on it — similar to what happened during the pandemic.
In Michigan, the auto industry accounts for about 20% of economic activity, according to a report from MichAuto, the automotive arm of the Detroit Regional Chamber.
Trump has insisted that tariffs on imported vehicles and auto parts would force auto businesses to rebuild their U.S. manufacturing presence after decades of offshoring.
He featured unionized auto workers at his April 2 “Liberation Day” unveiling of other global tariffs, telling the crowd that “foreign cheaters have ransacked our factories and foreign scavengers have torn apart our once beautiful American dream.”
The Center for Automotive Research in Ann Arbor estimated a total of $107.9 billion in costs from the auto tariffs for all U.S. automotive manufacturers as originally announced, including $41.9 billion for the Detroit Three, who combined made $17.7 billion in profits last year. CAR projected 6.8 million vehicles would be affected annually by the tariffs at the three companies in the report funded by the Detroit Three’s lobbying group, the American Automotive Policy Council. Across the industry, 17.7 million vehicles were estimated to be affected annually.
The new car sales frenzy brought on by consumers looking to get ahead of tariff-induced price hikes may already be in the rearview mirror, Jonathan Smoke, chief economist at dealer digital services provider Cox Automotive Inc., said Tuesday. Prices that have begun creeping higher in recent weeks are “sapping momentum” and could lead to lower sales figures in the coming weeks, he said during an online presentation.
Buyers flocking to dealers to beat tariffs means retailers now have about 20% less days’ supply on hand than they did a month ago, added Charlie Chesbrough, a Cox senior economist.
“With tariffs now in place, existing supply is now more valuable, and dealers are less eager to make a deal,” he said, while incoming vehicles are likely to face price adjustments due to the new levies.
Erin Keating, an executive analyst at Cox, said the impact of tariffs on automakers and individual models isn’t evenly distributed, and some have looked to take advantage of the uncertainty by holding prices steady or even offering new discounts.
“Automakers and dealers are seeing this as an opportune time to make a grab for market share,” she said. “Even those that anticipate significant cost impact recognize the moment as an opportunity to take advantage of the froth in the market.”
Washington Bureau Chief Melissa Nann Burke and Staff Writer Summer Ballentine contributed.
