Trump Compromises Again! US Auto Industry Welcomes "Tariff Downgrade"...

On Tuesday local time, US President Donald Trump signed an executive order that "patched" some of the auto tariffs implemented earlier this month, bringing a glimmer of good news to the auto industry, which is currently grappling with regulatory uncertainty and the additional costs imposed by tariffs.

That day, Trump signed the executive order aboard Air Force One. Although the 25% auto tariffs will remain in place, the new measures will reduce the overall tariff level on auto imports. In simple terms, imported cars will be exempt from separate tariffs similar to those on steel and aluminum, to avoid the cumulative effect of overlapping tariffs.

According to a senior US Commerce Department official, the White House will also adjust the 25% tariff on auto parts originally scheduled to take effect on May 3, allowing automakers that produce and sell complete vehicles in the US to apply for a tariff deduction of up to 3.75% (25% X 15%) of the vehicle's value. This deduction will be reduced to a maximum of 2.5% (25% X 10%) after one year and will be eliminated the following year (April 30, 2027).

It is currently unclear how automakers will receive such compensation, but it is important to note that the policy applies to vehicles produced after April 3.

"We just want to help them through this little transition period," Trump said on Tuesday.

The Auto Industry "Fights Back"

This concession came after weeks of intensive lobbying by automakers, parts suppliers, and auto dealers, who warned that excessive tariffs could drive up car prices, trigger factory shutdowns, and lead to job losses.

Stellantis Chairman John Elkann had previously warned that Trump's trade policies "put the US and European auto industries at risk." Another auto industry executive also stated, "We have urged the government not to impose these tariffs on us over and over again... because it really endangers the health of our industry."

In addition, six major organizations representing the US auto industry also unusually joined forces to lobby the Trump administration against imposing these tariffs. These organizations represent franchised dealers, suppliers, and nearly all major automakers, with the exception of Tesla, Rivian, and Lucid.

In a letter to Trump administration officials, they stated that the impending tariffs could jeopardize US auto production. The letter pointed out that many auto suppliers are already "in trouble" and cannot afford additional cost increases, leading to broader industry issues.

Therefore, Trump's latest concession will mark an initial victory for the auto industry and also signal another "retreat" by Trump on his most aggressive tariff policies.

However, it is worth noting that although the latest adjustments will alleviate some of the cost pressures on automakers, parts suppliers, and dealers to a certain extent, it is still difficult to gauge the actual reduction in financial costs. The entire industry is still grappling with the 25% tariff on imported cars, which could significantly drive up industry costs and exacerbate supply chain pressures.

Corporate Reactions

Jennifer Safavian, CEO of Autos Drive America, which represents major foreign automakers operating in the US, called the new measures "a welcome relief for automakers, but there is still more work to be done."

Safavian urged Trump to "create a growth-friendly and regulatory environment for the prosperity of US manufacturing."

Ford CEO Jim Farley expressed appreciation for the anticipated changes in an email statement on Tuesday, but also warned that the company still faces significant cost increases.

"Ford welcomes and appreciates President Trump's decisions, which will help mitigate the impact of tariffs on automakers, suppliers, and consumers," he wrote.

Stellantis Chairman John Elkann also responded, saying, "Stellantis appreciates the tariff relief measures decided by President Trump. As we further assess the impact of tariff policies on our North American operations, we look forward to continuing to work with the US government to strengthen the competitiveness of the US auto industry and stimulate exports."

General Motors CEO Mary Barra also thanked Trump, saying it "helps create a level playing field for companies like GM and allows us to invest more in the US economy."