Break for automakers? Trump plans reducing impact of 25% auto tariffs

President Donald Trump’s administration is reportedly planning to reduce the impact of automotive tariffs by alleviating some duties imposed on foreign parts in domestically manufactured cars, and keeping tariffs on cars made abroad from piling on top of other ones. 

Commerce Secretary Howard Lutnick said, “President Trump is building an important partnership with both the domestic automakers and our great American workers. This deal is a major victory for the President's trade policy by rewarding companies who manufacture domestically, while providing a runway to manufacturers who have expressed their commitment to invest in America and expand their domestic manufacturing.” 

Automakers anticipated relief from the auto tariffs ahead of Trump's visit to Michigan, home to major automakers and suppliers. Last week, a coalition of US auto industry groups urged Trump not to impose 25 per cent tariffs on imported auto parts, warning of potential negative impacts on vehicle sales and prices. Trump had previously announced plans to implement these tariffs by May 3.

The industry groups, representing companies like General Motors and Toyota, expressed concerns that tariffs would disrupt the global supply chain, leading to higher consumer prices and challenges in vehicle servicing. They highlighted that many suppliers are not financially equipped to handle abrupt tariff-induced disruptions, which could result in production halts, layoffs, and bankruptcies.

Trump had announced a sweeping tariff plan significantly impacting the global auto industry. He imposed a permanent 25 per cent tariff on all imported cars starting April 2. He called this a major step in reshaping trade policies, arguing that the hike would benefit American industry and consumers. He noted that cars built in the US would not be subject to the tariff. Amid speculation about Tesla CEO Elon Musk's influence, Trump clarified that Musk did not advise on auto tariffs.