Donald Trump eases auto tariffs to prevent price hikes, job losses, and plant closures

US President Donald Trump signed an executive order on Tuesday (April 29) to ease the impact of his auto tariffs, responding to lobbying from automakers, parts suppliers, and car dealers. The move comes after warnings that excessive levies could lead to higher car prices, plant shutdowns, and job losses in the US auto industry. Trump’s decision to soften the blow of the tariffs provides a reprieve for the industry, allowing car manufacturers some breathing room to address their concerns.

“I have now determined that, to the extent these tariffs apply to the same article, these tariffs should not all have a cumulative effect (or ‘stack’ on top of one another),” Trump explained in the executive order. He emphasised that stacking tariffs on top of each other could exceed the necessary rate to achieve the intended policy goal.

Key provisions of the Executive Order

Under the new order, imported automobiles will no longer face additional tariffs on aluminum and steel, preventing multiple tariffs from being imposed on the same product. The change is aimed at alleviating the economic pressure on automakers.

Also, Trump has adjusted the 25% tariffs on auto parts, which were set to go into effect on May 3. The new plan allows carmakers who produce and sell completed automobiles in the US to claim an offset worth up to 3.75% of the value of a domestically made vehicle. This offset will decrease to 2.5% in one year and be eliminated the following year, in an effort to incentivize domestic manufacturing. This relief will apply to cars produced after April 3.

The Executive Order was released ahead of Trump’s visit to Michigan, a key state for the auto industry.

Industry reactions

The decision comes after weeks of lobbying by the auto industry, which expressed concerns that Trump’s original tariffs could disrupt the North American production network integrated between the US, Canada, and Mexico. Auto manufacturers were particularly worried that tariffs would increase car prices by thousands of dollars and strain the supply chain.

In Michigan, Trump said the move was designed to give the auto industry “a little relief,” especially as companies work to bring more manufacturing back to the US. “We just wanted to help them … if they can’t get parts, we didn’t want to penalize them,” he said.

Trump’s continued tariff flexibility amid economic concerns

This move is part of Trump’s broader strategy to show flexibility on his trade policies, which have sparked economic uncertainty. The decision to soften auto tariffs is seen as a response to the growing concerns over potential economic slowdown and inflation.

A recent Reuters/Ipsos poll revealed that just 36% of Americans approve of Trump’s economic stewardship, the lowest approval rating during his current term.

Impact of tariffs on the global economy

Trump’s aggressive trade policies, particularly his tariffs on foreign goods, have reverberated across the global economy. The financial markets reacted negatively to the uncertainty generated by the tariffs, triggering fears of a potential recession and further inflationary pressure. The administration’s decision to soften the impact on the auto industry marks a strategic shift to manage the ongoing effects of these trade policies.

The shift in tariff policy comes as Trump continues to navigate complex trade relationships, balancing his goals of reshoring manufacturing and protecting US workers with the realities of economic pressures on the auto industry.