Trump Signs Order To Prevent His Auto Tariffs From Stacking On Top Of Each Other

President Donald Trump signed a pair of directives easing the impact of his tariffs on the automotive industry, yielding to weeks of intense lobbying from automakers, parts suppliers and dealers who warned excessive levies could push up car prices, triggering plant shutdowns and job losses.

Under the first executive order, signed aboard Air Force One, imported automobiles were given a reprieve from separate tariffs on aluminum and steel, an effort to prevent multiple levies from piling on top of each other.

Trump's tariffs that threatened the auto industry “should not all have a cumulative effect” he said in the order, “because the rate of duty resulting from such stacking exceeds what is necessary to achieve the intended policy goal.”

A separate proclamation changed the 25% tariff on imported auto parts that takes effect on May 3. Under that measure, carmakers who produce and sell completed automobiles in the US can claim an offset worth up to 3.75% of the value of American-made vehicles.

The offset will reduce in one year to as much as 2.5% of the value of those cars, and then be eliminated the following year, a bid to motivate domestic manufacturing. The offset will be available for cars that were produced after April 3.

“I want them to make their parts here,” Trump said during a rally outside Detroit on Tuesday. “We gave them a little bit of time before we slaughter them if they don't do this.”

The moves represent a partial — and for the components measure, temporary — retreat from the most damaging scenario of imported finished vehicles and parts potentially facing several layers of steep tariffs. Trump has argued the levies are necessary to boost domestic auto production and employment. Carmakers have warned imposing steep tariffs over the long term would work against that goal.

Automakers continue to have questions even after Trump's relief measures.

“This is the biggest challenge: the uncertainty. We've got a lot of policy in flux,” John Bozzella, president of the Alliance for Automotive Innovation, said in a Bloomberg TV interview. “We still don't know the extent to which we're going to see parts tariffs, we don't know how long these policies will be in place and how bilateral negotiations will take place between the US and its trading partners.”

The alliance represents most major automakers including General Motors Co., Toyota Motor Corp. and Volkswagen AG.

Trump's latest tweaks will lighten the cost burden on car manufacturers and their suppliers, said Mitch Zajac, an automotive and supply chain attorney with Butzel Long in Detroit. Concessions extend to both foreign made vehicles and domestic manufacturers importing car parts from abroad, he said. Still, industry still must contend with a 25% duty on imported vehicles that threatens to significantly raise industry costs and pressure supply chains.

“There is relief here,” Zajac said.

Trump softened his stance ahead of a trip to Michigan, where he plans to mark the first 100 days of his second term in the White House with a speech in Macomb County. The conservative suburb of Detroit is home to many of the blue-collar workers the president says his tariffs are meant to help.

Automakers have been awaiting details from the administration on how to calculate tariff costs for auto parts. Some automakers have paused production and laid off workers as they game out different scenarios and spar with suppliers over who will shoulder the bulk of the new costs.

That instability was on display earlier Tuesday when GM withdrew earnings guidance for the year, citing the effect of tariffs. The company also postponed a call with investors to give executives time to digest the new rules and its impact on their financial outlook.

Carmakers have so far been holding prices steady to calm worries that the duties will drive up vehicle costs by thousands of dollars. Fear that those levies could push up sticker prices drove a surge in sales in the first quarter.

The fervent pace of sales could slow as pre-tariff inventory on dealer lots runs out and prices increase amid weakening consumer confidence. AutoNation Inc., one of the biggest US car dealership chains, said last week that car companies would only boost sticker prices to offset tariffs as a last resort because they want to protect market share. But AutoNation's chief executive officer, Mike Manley, also said he expects industry sales to slow due to tariff headwinds.