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, according to the Commerce Department.
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 official said.
A commerce 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 phases out in the third year, pressuring 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.
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.
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 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.
It’s not immediately clear what the full impact of the change will be for Canada’s auto industry, which received a partial carve-out 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.
But Flavio Volpe, president of the Automotive Parts Manufactures’ Association, said the partial measures that seem to be coming 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.
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.
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Automakers said earlier on Monday they were expecting Trump to issue relief from the auto tariffs ahead of his trip to Michigan, which is home to the Detroit Three automakers and more than 1,000 major auto suppliers.
General Motors CEO Mary Barra and Ford CEO Jim Farley praised the reported changes.
“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.”
But GM also 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.”
