By Andrea Shalal and David Lawder WASHINGTON (Reuters) – 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. The changes to Trump's 25% vehicle tariffs will provide auto companies with credits for up to 15% 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 administration official said.
The official said this would work out to allowing automakers to import duty-free parts worth about 3.75% of the sticker-price value of domestically produced cars they sell in the first year, and 2.5% in the second year. The benefit, retroactive to April 3, phases out in the third year to push companies to move parts production to the U.S. Moreover, autos and parts subject to those tariffs would no longer be subject to Trump's other tariffs, including 25% duties on Canadian and Mexican goods, 25% levies on steel and aluminum, as well as 10% duties applied to most other countries.
The change also extends a duty-free exemption for North American parts that comply with the U.S.-Mexico-Canada trade agreement (USMCA) rules of origin. "If you build your car elsewhere and bring them in on a ship, right, you are going to be at a very, very big disadvantage," the official said. In the case of the metals tariffs, auto makers would pay either the vehicle tariff or the steel and aluminum tariffs, whichever is higher, the official said.
NO RELIEF FOR CHINA A White House official said, however, that the tariff relief would not apply to Chinese parts, which will continue to be subject to Trump's latest tariffs of at least 145% in addition to any prior duties. Trump was scheduled to travel to the U.S. auto hub of Michigan on Tuesday to mark his first 100 days in office, during which the Republican president has upended the global economic order. The state is home to the Detroit Three automakers and more than 1,000 major auto suppliers.
Softening the impact of auto levies is his administration's latest move to show flexibility on tariffs which have sown turmoil in financial markets, created uncertainty for businesses and sparked fears of a sharp economic slowdown. The first quarterly report on U.S. gross domestic product covering Trump's term is due out on Wednesday. It is expected to reflect a large drag from the effect of his tariffs, mostly from a record surge in imports as companies and consumers front-loaded purchases of foreign goods to try to beat the new levies.
The economy was forecast to have expanded at just a 0.3% annualized rate from January through March, according to a Reuters poll of economists, down from 2.4% in the final three months of 2024.
