President Donald Trump will ease upcoming tariffs on automakers, who are facing a new 25% duty on most vehicle parts starting Saturday. The additional levy would have come on top of existing tariffs on steel, aluminum, and nearly all imported vehicles.
Senior Commerce Department officials confirmed to Scripps News on Tuesday that President Trump would sign the executive order on tariffs.
The order says that a car that is assembled in the U.S. and has at least 85% of its parts made in the U.S. will not be subject to any tariffs.
For an automobile finished in the U.S. with a retail value of $40,000, an automaker can import up to $1,500 in parts without being charged a tariff.
This order comes after automakers said they need time to ramp up supply chains domestically. Manufacturers said that tariffs would hold them back from increasing domestic manufacturing. The Trump administration said manufacturers have pledged to invest tariff savings into new plants, more shifts, and more jobs in the U.S.
U.S. automakers welcomed the announcement after brewing tensions between them and the Trump administration.
“Ford welcomes and appreciates these decisions by President Trump, which will help mitigate the impact of tariffs on automakers, suppliers and consumers. 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. Ford sees policies that encourage exports and ensure affordable supply chains to promote more domestic growth as essential," Jim Farley, president and CEO of Ford Motor Company, said.
Commerce Secretary Howard Lutnick said the deal was intended to reward manufacturing companies in the United States.
"President Trump is building an important partnership with both the domestic automakers and our great American workers," Lutnick said in a statement "This deal is a major victory for the President's trade policy by rewarding companies who manufacture domestically, while providing runway to manufacturers who have expressed their commitment to invest in America and expand their domestic manufacturing.”
The Wall Street Journal was first to report the Trump administration's softening stance toward auto tariffs.
Treasury Secretary Scott Bessent also acknowledged the Trump administration's evolving stance toward auto tariffs.
"President Trump has had meetings with both domestic and foreign auto producers, and he's committed to bringing back auto production to the U.S., so we want to give the automakers a path to do that quickly, efficiently, and create as many jobs as possible," he said on Tuesday.
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The U.S., Canada, and Mexico have largely integrated their automaking industries, with numerous American automakers owning plants in all three nations.
The U.S. has also been subjected to retaliatory tariffs on cars made in America. Canada, for instance, implemented a 25% tariff on autos made in the U.S.
Experts say the threat of auto tariffs has caused a lot of uncertainty in the automotive industry.
"Forecasting sales in this volatile market is quite challenging, and that is what we have right now, a market being steered by headlines coming from the White House," said Charlie Chesbrough, senior economist at Cox Automotive. "Concerns about potential future vehicle prices due to tariffs led to a surge in March sales, and April began with similar robustness. However, inventory levels have declined substantially over recent weeks, likely pushing vehicle prices higher, so the end of April may not be as strong. With economic concerns rising and consumer confidence declining, the outlook for new auto sales from here is more troubling. If current policy holds, prices in the new-vehicle market will be noticeably higher in the coming months as more costly products replace pre-tariff inventory."
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Another trade policy change this week involves Chinese imports valued at $800 or less, which are set to lose their tariff exemption on Friday.
