AsianFin -- U.S. President Donald Trump on Tuesday signed a pair of executive orders to offer tariff reprieve for automakers, which marked the president retreated on his most aggressive tariffs amid fears about surges in U.S. car prices, disruption of supply chains and job losses.
Credit：Xinhua News Agency
Auto giants’ shares rallied at the afternoon trading following Trump’s executive orders as the . U.S.-listed shares of Netherlands-based Stellantis finished nearly 2.5% higher, and Ford Motor Company and Tesla Inc. rose 1.3% and 2.1%, respectively. On the other hand, General Motor Company shares slid more than 0.6% as of close after falling as much as 4% at midday.
Trump made the decision to avoid the cumulative effect of overlapping tariffs on certain articles, such as automobiles and automobile parts. “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) because the rate of duty resulting from such stacking exceeds what is necessary to achieve the intended policy goals,” the Republican president wrote in an executive order released by White House on Tuesday.
Under the order, manufactures facing the 25% auto tariffs are not subjected to separate levies, such as 25% tariffs on steel and aluminum. The 25% duties Trump imposed to address the follow of illicit drugs into U.S. on certain goods from Mexico and Canada cannot be stacked with separate metal tariffs.
Trump also modified his tariffs on auto parts in another executive order. According to the order, the 25% tariffs will still go into effect on May 3, but the Trump administration allows automakers to be reimbursed over the next two years for a proportion of cost of their imported parts.
To offset 25% tariffs on auto parts, auto companies are able to qualify for an amount equal to 3.75% of the value of a car manufactured in the United States by May 1, 2026. The reimbursement would fall to 2.5% of the car’s value in the following year, through April 30, 2027. The Trump administration said it calculated those rates by applying a 25% duty to 15% of the value of a U.S.-assembled vehicle in the first year, and a 25% duty to 10% of that value in the second year.
Tariffs on China, neither those on automobiles nor parts, are provided waiver, while exemptions for United States-Mexico-Canada Agreement (USMCA) compliant auto parts from Mexico and Canada will last. USMCA is a trade agreement that Trump's first administration negotiated to replace the decades-old North American Free Trade Agreement.
The latest order means a carmaker has no need to pay any parts tariffs if the vehicle is made with 85% of U.S. production and USMCA-compliant content in the first year, and the 90% of domestic and USMCA-compliant content in the next year, the Wall Street Journal cited a senior American official. The official said the order makes more time for automakers to pivot the rest of their supply chains without paying hefty tariffs since a large part of parts they are using is made in U.S.
Trump late March signed an executive proclamation to impose a 25% tariff on all automobile imports, effective on eastern daylight time April 3 at 12:01 a.m. He said that the tariff hit “all cars that not made in the United States”, and if the cars are “made in the United States, it’s absolutely no tariff.” The president confirmed on April 2 the auto tariffs entered effect as scheduled.
Trump said at Tuesday night that he was showing “a little flexibility” to the automakers but the administration will “slaughter” them if they don’t bring the parts back to the U.S. “We gave them a little time before we slaughter them if they don’t do this,” he said.
