Trump plans to soften impact of tariffs on automakers
- Trump plans to soften the impact of automotive tariffs by ensuring that duties on foreign-made cars will not stack on top of other tariffs, such as those on steel and aluminum, and by easing levies on foreign parts used to manufacture vehicles in the U.S., according to the Wall Street Journal, citing people familiar with the matter.
- The sources also indicated that automakers could be reimbursed for tariffs already paid.
- The administration reportedly plans to modify the auto tariff on foreign parts — expected to be set at 25% — by reimbursing automakers an amount equal to 3.75% of the value of a U.S.-made car for one year. The reimbursement would then fall to 2.5% in the second year before being phased out entirely.
- The move would be made official today.
Assessment
In my opinion, the expected relief is minor. According to Cox, the transaction price of a new vehicle in US was $48,401 in September 2024. Based on this, a 3.75% relief would reduce the cost burden by approximately $1,815. The Center for Automotive Research estimated that the Detroit Three could see tariffs of nearly $5,000 for the parts they import on average for each car produced in the U.S., and about $8,600 on average for each car they import. Therefore, even with the relief, they will still incur a tariff headwind of $3,185 ($5,000 less $1,815) for for the parts they import for each car.