Trump Offers Relief on 25% Auto Tariffs: What it could mean for automakers, US jobs and more

In a notable shift, US President Donald Trump on Tuesday signed executive orders easing parts of his 25 per cent tariff policy on automobiles and auto components, amid growing concerns that the levies could harm American manufacturing.

The decision follows warnings from automakers and analysts who said the tariffs risked raising car prices, denting sales, and undermining the competitiveness of US-built vehicles globally. Trump described the move as a temporary support measure to help automakers through a “short term” transition phase.

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“We just wanted to help them during this short-term transition,” Trump told reporters, adding, “We didn’t want to penalise them,” Associated Press (AP) reported.

Tariff relief explained: What changes for carmakers?

The announcement includes a rebate mechanism for vehicles assembled in the US using foreign parts. For the first year, the rebate will amount to 3.75 per cent of a vehicle’s sales price, based on the 25 per cent  tariff on parts comprising 15 per cent of the vehicle’s value. In the second year, the rebate would drop to 2.5 per cent as it targets a smaller portion of the parts content.

Treasury Secretary Scott Bessent emphasised the administration’s focus on job creation within the domestic auto sector.

“President Trump has had meetings with both domestic and foreign auto producers, and he’s committed to bringing back auto production to the US,” Bessent said. “So we want to give the automakers a path to do that, quickly, efficiently and create as many jobs as possible,” he added.

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A senior Commerce Department official, speaking anonymously, said carmakers had cautioned the administration that shifting supply chains and building new facilities would take time. The relief is expected to give them room to initiate new production lines and hiring plans, with announcements anticipated in the coming weeks.

Carmakers welcome move, but experts urge caution

Automakers responded positively to the move. Stellantis Chairman John Elkann said the company welcomed the administration’s support.

“While we further assess the impact of the tariff policies on our North American operations, we look forward to our continued collaboration with the US Administration to strengthen a competitive American auto industry and stimulate exports,” he said.

General Motors CEO Mary Barra echoed similar sentiments, stating: “We believe the President’s leadership is helping level the playing field for companies like GM and allowing us to invest even more in the US economy.”

Ford CEO Jim Farley highlighted the company’s longstanding commitment to US production.

“We will continue to work closely with the administration in support of the president’s vision for a healthy and growing auto industry in America,” he said. “If every company that sells vehicles in the US matched Ford’s American manufacturing ratio, 4 million more vehicles would be assembled in America each year.”

However, some industry experts warned that the short-term fix might not be sufficient. Sam Fiorani of AutoForecast Solutions said stability was essential for the automotive sector.

“Finding a way to get the auto industry back working has to be paramount in this,” Fiorani said.

He added, “Making a production change for vehicle manufacturing takes minimum, months, and usually years, along with hundreds of millions if not billions of dollars. And so it is not something that they take lightly.”

According to an analysis by economist Arthur Laffer, unmodified tariffs could have added over $4,700 to the price of a vehicle. With the average new car selling for more than $47,000 last month, the tariffs risked putting further pressure on consumers and the complex, globally integrated automotive supply chain.

(With inputs from  AP)