Trump softens auto tariffs, offers industry 2-year grace period

U.S. President Donald Trump announced Tuesday a partial rollback of tariffs targeting the automotive sector, introducing a new policy that aims to provide manufacturers with a two-year window to adjust their supply chains and reduce dependence on foreign imports.

The decision outlines procedures for determining which tariff applies in cases where multiple duties could be levied on the same imported product, ensuring that imported automobiles subjected to automotive tariffs will be exempt from additional overlapping levies.

Alongside the announcement, Trump issued a presidential proclamation granting automakers a two-year grace period to relocate production and supply chains to the United States. The move, framed as an effort to curb “American reliance on imports of foreign automobiles and their parts,” marks a temporary shift in the administration’s aggressive trade stance.

The automotive industry, one of the hardest-hit sectors in Trump’s ongoing campaign against multilateral trade agreements, welcomed the announcement. The relief measure coincided with the president’s visit to the Detroit area to commemorate his 100th day in office. “We just wanted to help them during this little transition,” Trump said, calling the measure “short term.”

‘Grace period’ aims to spur domestic auto boom

Industry analysts have previously cautioned that the combination of tariffs could lead to price hikes, reduced car sales in the domestic market, and potential job losses. While the administration has consistently maintained that tariffs are critical for incentivizing domestic manufacturing, a senior official from the U.S. Commerce Department acknowledged during a briefing that temporary relief was necessary to give companies time to reorganize supply networks.

“You’re going to see a massive resurgence of domestic auto manufacturing,” the official claimed.

In addition to the 25% tariff imposed on finished imported vehicles, automakers have also been impacted by a 25% duty on steel and aluminum. Further tariffs on imported auto parts are expected to come into effect on May 3.

Under the new policy framework, companies will no longer be subjected to dual tariffs for the same vehicle. Instead, they will pay only the higher of the two levies—either on the finished car or on its steel and aluminum content, according to Commerce Department officials.

Furthermore, companies that import vehicle parts for assembly within the United States will be allowed to offset 3.75% of a vehicle’s list price in the first year, followed by a 2.5% offset in the second year. This adjustment is designed to facilitate the gradual repatriation of supply chains over two years.

Automakers reportedly assured the Trump administration that this grace period would result in significant new investments and job creation. Currently, approximately half of all vehicles sold in the United States are assembled domestically, while around 25% originate from Mexico and Canada, with the rest imported from countries such as Germany, Japan, and South Korea.

Some manufacturers have already responded to the evolving tariff landscape by announcing new investments. General Motors recently revealed plans to increase truck production at its facility in Fort Wayne, Indiana. Ford CEO Jim Farley issued a statement expressing support for the administration’s revised stance, saying the decision would help reduce the tariff burden on automakers, suppliers, and consumers.

“Ford sees policies that encourage exports and ensure affordable supply chains to promote more domestic growth as essential,” Farley stated, estimating that U.S. factories could potentially produce an additional four million vehicles per year, creating hundreds of thousands of jobs.

Foreign automakers, including Nissan, Honda, and Volvo, have also disclosed plans to expand their investments in the United States in response to the administration’s evolving trade strategy.