Trump Tweaks Tariff Burden On US Automakers
Catherine RichardsPresident Donald Trump's administration has offered to offset the 25pc tariff on foreign-made auto parts, scheduled to start on 3 May, and to exempt auto parts from any ...
President Donald Trump's administration has offered to offset the 25pc tariff on foreign-made auto parts, scheduled to start on 3 May, and to exempt auto parts from any additional tariffs they face from other import taxes imposed in recent months.
Trump, who today announced the change in tariffs ahead of a political rally in Michigan, a key US car manufacturing state, cast his decision in terms of giving US automakers a reprieve from his tariff policies.
But as in other cases when he changed his mind on tariffs, the US auto industry will still face a substantial burden from import taxes imposed since Trump took office.
Trump's 25pc tariffs on foreign cars went into effect on 3 April, and a 25pc tariff on imported auto parts was scheduled to go into effect on 3 May.
Under an executive order Trump signed today, the auto makers can be partially refunded the cost of the tariffs on imported auto parts, subject to a cap of 15pc of the value of an assembled car until April 2026, dropping to a 10pc cap until April 2027. The refund cannot exceed 3.75pc of a car's manufacturer suggested retail price in the first year, dropping to 2.5pc in the second year.
The idea behind the adjustment is to force US automakers to become wholly reliant on auto parts made in the US in the next two years, commerce secretary Howard Lutnick explained. In theory, at least, a US-made car that is made with 85pc domestic components would not face an additional tariff cost.
A separate executive order clarifies that the tariffs on foreign-made cars and auto parts will not be calculated in addition to any other tariffs Trump has imposed on Canada and Mexico, and will not be counted on top of tariffs imposed on steel, aluminum and their derivative products.
"This is just a little transition," Trump told reporters at the White House today, announcing the latest reversal of his tariff policy. "We're just giving them a little chance, because in some cases, they can't get the parts fast enough."
