Trump provides relief to auto industry: tariff reductions for vehicles made or sold in the US

Donald Trump offered a sigh of relief to the auto industry by signing a temporary tariff reduction affecting nearly all automakers. Coinciding with the milestone of his first 100 days in office, the president announced a 15% deduction for the first year and a 10% deduction for the following year. This move aims to assist companies that need to import parts, helping them transition to bringing the entire production chain to the U.S. while minimizing the impact of "overlapping levies" on the sector.

Since April 3, vehicles imported into the United States have been subject to a 25% tariff, with one exception: parts from Canada and Mexico are exempt if they fall under the North American Free Trade Agreement (T-MEC).

Limiting the impact of overlapping tariffs

To that end, Trump signed an executive order to limit the impact of "overlapping" tariffs. As a result, the 25% levy on an imported vehicle would not be added to the 25% applied to steel or aluminum, according to a Commerce Department official.

In addition, the Administration granted the industry a two-year grace period to move supply chains to the United States. Manufacturers of vehicles made and sold in the U.S. who use imported parts and pay the 25% tariff will be able to recoup a portion of the money.

Two-year transition period for U.S. manufacturing

Provided the vehicle is assembled in the United States, the manufacturer will be able to reimburse 15% of the car's value in the first year and 10% in the second year. After that, no reimbursement will be available. This amounts to 3.75% of the vehicle's sales price in the U.S. during the first year and 2.5% in the second year.

The idea is for cars to be fully made in the United States after this "grace period." "We just wanted to help them during this little transition. I want them to manufacture their parts here, but I gave them a little bit of time. It's 15% and then 10% (...) so it's not too bad," Trump declared in Warren, a key hub of the auto industry, where he held a rally to celebrate the first 100 days of his second term.

"Reduce U.S. dependence on foreign vehicle imports"

The ultimate goal, according to the White House, is to "protect national security by encouraging domestic auto production and reducing U.S. dependence on imports of foreign vehicles and their components."

The Department of Commerce noted that they have been in constant contact with manufacturers and believe the two-year period is sufficient to establish a supply chain in the United States.

Manufacturers applaud the initiative

This statement was echoed by the U.S. Automotive Policy Council, which represents General Motors, Ford, and Stellantis, and applauded the measures. According to its chairman, Matt Blunt, the overlapping tariffs are a "significant concern," as he stated in remarks reported by AFP.

"Foreign auto industries, driven by unfair subsidies and aggressive industrial policies, have expanded, while U.S. production has stagnated," the White House said.

Half of all vehicles bought in the U.S. in 2024 were imported

In 1985, U.S.-owned companies manufactured 11 million cars in the United States, accounting for 97% of domestic production. In 2024, Americans purchased about 16 million vehicles, with half of them being imported.

At the moment, no details have been provided regarding imports from China, which could be taxed up to 245% for electric vehicles.