Trump Eases Auto Tariffs by Offsetting Parts Costs
President Donald Trump has signed an executive order offering some tariff relief for automakers, preserving a 25% levy on imported vehicles but offering offsets for the cost of imported parts.
U.S. Commerce Secretary Howard Lutnick previewed the changes in a statement sent to news outlets ahead of a planned trip by Trump to Michigan. The president is expected to deliver a speech capping his first 100 days in office in the same state where the Detroit 3 are based.
“President Trump is building an important partnership with both the domestic automakers and our great American workers,” writes Lutnick in the 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 order applies equally to foreign and domestic manufacturers and coincides with a May 3 go-live date for new tariffs on foreign-made auto parts. Rather than applying a “double hit” to parts — which could be taxed multiple times as they cross the U.S. border at different stages of assembly — only the highest per-product rate applies.
Just as importantly, the order gives automakers the opportunity to qualify for “offsets” of the cost of imported parts. The offsets are worth up to 15% of a vehicle’s MSRP for the first year and 10% for one year starting May 3, 2026, offering effective cost reductions of 3.75% and 2.5%, respectively.
The offsets are intended to give factories time to reshore production and can only be applied to vehicles built in the U.S. by American workers, according to the order.
