U.S. president Trump is hinting there may be temporary exemptions to the 25-percent tariffs currently imposed on imported vehicles, and soon on parts. The stated reason would be to offer automakers time to repatriate their production to the United States.
“I'm looking at how to help automakers. They're switching to parts made in Canada, Mexico and elsewhere, but they need a little time, because they're going to be producing them here soon,” Trump said.
Stocks get bump
Shortly after the remarks, shares in General Motors, Ford and Stellantis rebounded, hitting their session highs and reversing earlier losses. At the same time, this latest change of course yet again introduces fresh uncertainty regarding the U.S. administration’s strategy and goals.
Tariffs shaking up the industry
Tariffs on vehicle imports threaten to raise prices for American consumers and deeply disrupt deeply integrated supply chains between the US, Canada and Mexico. Trump claims the tariffs are an essential lever to revive domestic American auto manufacturing.
At present, the 25-percent tariffs apply to complete vehicles; those on parts are due to take effect no later than May 3. Canada and Mexico already benefit from partial exemptions if their vehicles meet the North American content criteria defined in the current free trade agreement.
Manufacturers lobby for targeted exemptions
For several weeks now, Detroit's Big Three automakers have been lobbying the Trump administration to exempt certain lower-cost components from the coming tariffs on auto parts. According to sources close to the matter, Ford, GM and Stellantis would agree to pay duties on complete vehicles and major components such as engines and transmissions, but not on all parts.
They argue that across-the-board tariffs on parts would inflate costs by billions, triggering profit warnings and job cuts - a contradiction with Trump's stated aim.
Despite the latest backtracking, the U.S. president maintains that respites for certain sectors, like tech, are only be temporary. Sector-specific tariffs are already in the pipeline to replace the current exclusions.