President Trump Loosens Auto Tariffs Amid Industry Pushback

• President Trump is softening the blow of his auto traiffs.
• The change comes among pushback from the industry.
• The change mixes credits with relief from duties on parts and materials.

President Donald Trump signed an order to loosen the initial tariffs he set for cars and their component parts after the industry pleaded its case with the administration. According to Reuters, the changes will give automakers a credit for up to 15% of the value of cars assembled domestically. That credit can then be applied to tariffs on imported parts, which go into effect May 3. 

For now, cars with at least 85% of their parts made in the U.S., Canada or Mexico would not face any tariffs. That percentage rises to 90% in the second year and then goes away entirely another year later. That means, in the first year, automakers would be able to import duty-free parts worth around 3.75% of the sticker-price value of cars that are made here in the States. That number lowers to 2.5% next year and disappears in the third year.

The reduction in tariffs would apply equally to both foreign and domestic automakers as long as their cars are assembled here and use American workers. The goal of the changes to Trump's tariff policy is to allow automakers time to bring parts manufacturing back to the U.S. Furthermore, foreign parts that are compliant with the United States-Mexico-Canada (USMCA) agreement, which Trump negotiated in his first term, will not be subject to tariffs.

The White House also said it wants to ensure automakers and parts manufacturers aren't subject to more than one tariff on the same item. The car tariffs would not be added to duties on metals like steel and aluminum and  automakers would pay tariffs on either the car itself or the metal content in it, whichever was higher. 

The change in tariff policy seemingly acknowledges how globally connected and difficult to untangle the car industry is while still applying the pressure the Trump administration says is key to economic security here in the U.S.