U.S. President Donald Trump signed two executive orders in suburban Detroit yesterday, modifying the rules on tariffs applied to the automotive industry. The latest measures are designed to ease the financial pressure on automakers and suppliers, who have been calling for relief for months.
New compensation mechanism for components…
One of the decrees provides for a partial refund of customs duties on components representing up to 15 percent of a vehicle's value in the first year, and 10 percent in the second, provided the vehicle is assembled in the U.S.
… and for complete vehicles
A manufacturer will be able to claim a credit equivalent to 3.75 percent of the suggested retail price (SRP) of vehicles assembled on U.S. soil between April 3, 2025 and April 30, 2026. This rate will drop to 2.5 percent the following year.
Conditional exemption from tariffs
Another notable softening: if a vehicle is manufactured in the U.S. with 85 percent of its components sourced from the U.S. market or in compliance with the CUSMA free trade agreement, no tariffs will apply for the first year.
With 50-percent domestic or CUSMA-compliant content, a manufacturer will only pay duties on 35 percent of the content, instead of the full amount. The U.S. administration says this is a way to give manufacturers time to adjust their supply chain.
No more tariff overlays
A second executive order specifies that vehicles and components will no longer be subject to the accumulation of multiple tariffs - such as those on steel and aluminum - where this exceeds the set policy objective.
Relief for some, frustration for others
Among suppliers, reaction is mixed. Magna International sees it as “a positive step towards greater clarity and predictability”, while others say the measures are insufficient. The slowdown in payments, combined with a global supply chain still fragile after microchip shortages and the pandemic, continues to put pressure on cash flow.
Persistent uncertainty
Despite the announcements, many grey areas remain. The White House has yet to specify how to declare the share of U.S. content in CUSMA-compliant vehicles, or how to claim refunds of duties already paid.
China, for its part, is still limiting exports of rare earths, essential for the production of electrified vehicles.
Adjustments already underway
Before the latest U.S. backtracking, the industry had started taking steps to adapt to the tariffs. Stellantis temporarily suspended production in Canada and Mexico; Nissan stopped exporting certain Infiniti models to the U.S.; Ford is offering employee pricing to all American customers; and several automakers are keeping vehicle shipments in U.S. ports to avoid paying customs duties.
At the retail level, some dealers have started adding a “customs tariff” line to invoices.
A little relief, or little relief?
The new softening will provide some respite for automakers and suppliers, that’s clear. But uncertainty - the eternal enemy of big business and investors - remains. And longer-term, the challenges remain. As an analyst from AutoForecast Solutions pointed out, “The industry relies on a global supply chain. These decrees don't take it fully into account.”
Redesigning production takes years. Automakers have to get permits, hire, build, tool. Strategic decisions require political stability, which these measures do not yet guarantee.