The US President announced a minor reduction in tariffs for car makers, enabling them more time to reorganise complex supply chains towards American manufacturing.
Tariffs on car makers in the United States will be partially reduced as the industry looks to reset – reorganising supply chains and business strategies – in the new automotive landscape.
United States (US) President Trump signed two executive orders on April 29 winding back the impact of the tariffs but not completely removing them.
The 25 per cent automotive tariff on imported vehicles was introduced on April 3, 2025 – which until this week’s new executive orders, was applied on top of other import tariffs announced since.
It will remain, as will a new tariff on ‘key components’ previously announced coming into effect on May 3, 2025.
Instead of abolishing it, the new orders mean car makers paying the current 25 per cent automotive tariff will not pay other additional tariffs – such as tariffs on steel or aluminium and nation-specific ‘reciprocal’ tariffs – on imports from Mexico or Canada.
The two countries are a sticking point for automakers after Mr Trump previously ignored calls from Ford, General Motors (GM) and Stellantis to delay the introduction of tariffs – or exclude Mexico and Canada from them.
The goal of the tariffs was to foster and increase auto manufacturing in the United States.
The automotive manufacturing supply chains across Mexico, Canada and the US are extensively interwoven with Stellantis, owner of Jeep, Chrysler and Ram Trucks, saying it could not relocate manufacturing supply chains overnight.
Now, the call for more time has been responded to by Mr Trump, who was in Michigan – the centre of the US auto industry – when he announced the reprieve.
“We gave them a little time before we slaughter them if they don’t do this,” Trump said in Michigan, as reported by the New York Times.
Additionally, a scheme allowing car makers to apply for an exemption to offset costs of imported parts will run over the next two years, enabling up to 3.75 per cent of the vehicle’s sticker price to be claimed this year and 2.5 per cent in 2026.
The changes also extend the duty-free exemption for North American parts complying with the US-Mexico-Canada trade agreement (USMCA) conditions.
In response, GM – which sells more vehicles than any other brand in the US, the world’s second largest market behind China – postponed its annual forecast to May 1 following Trump’s announcement.
The tariffs have seen different reactions from rivals, including Ford and Stellantis, both offering ‘employee pricing’ to retail customers to stave off fears of a sales slump due to anticipated higher prices.
Analysts predicted the average sticker price of a new car in the US could increase by an average of $US12,000 ($AU18,763) with the full impact of the tariffs costing the industry potentially billions.
