In a notable shift from his aggressive tariff policies, President Donald Trump has signed an executive order and proclamation easing some of the burdens associated with automotive tariffs, offering temporary relief to U.S. automakers as they navigate a volatile trade landscape. The announcement, made during a rally in Michigan, marks the latest development in a rapidly evolving strategy aimed at revitalizing American manufacturing.
Tariff Relief with Conditions
While the 25% tariff on imported cars remains in place, and a new 25% tariff on imported auto parts is set to take effect on May 3, Trump introduced a set of exemptions that will soften the immediate blow to domestic automakers. Companies producing cars in the U.S. will now be eligible for reimbursement for imported car parts—initially up to 3.75% of the value of the domestically produced vehicle. This cap will decrease to 2.5% in the second year and phase out entirely thereafter.
The revised policy also addresses the problem of cumulative tariffs. Automakers will now be subject only to the highest applicable auto-related tariff rather than multiple overlapping levies, such as those on steel, aluminum, and final vehicle imports.
Additionally, cars made up of at least 85% parts compliant with the United States-Mexico-Canada Agreement (USMCA) and produced domestically will be exempt from tariffs altogether, reinforcing Trump’s emphasis on re-shoring manufacturing capacity.
“This is a temporary break,” Trump told supporters. “We gave them a little time before we slaughter them if they don’t do this.”
Automakers’ Influence and Reaction
According to multiple White House sources, the policy shift came after direct conversations between Trump and several auto industry CEOs who raised alarms over the potential economic fallout. Executives warned that the high tariffs could hamper production, disrupt supply chains, and result in job losses—contrary to Trump’s stated goal of bolstering domestic employment.
Kevin Hassett, director of the White House National Economic Council, confirmed that Trump signed the order en route to Michigan, underscoring the urgency of the issue. “It’s all about getting workers back to work in the places where we make things in America,” Hassett said on CNN’s The Arena.
General Motors CEO Mary Barra praised the administration’s responsiveness, stating, “We’re grateful to President Trump for his support of the U.S. automotive industry and the millions of Americans who depend on us.”
Ford and Stellantis echoed that sentiment. “Ford welcomes and appreciates these decisions by President Trump,” the company said in a statement, while Stellantis Chairman John Elkann called the tariff relief “appreciated.”
Economic and Market Impact
Despite the immediate relief, uncertainty still clouds the industry’s outlook. GM announced that it would no longer stand behind its previous profit guidance for 2025, citing the ongoing unpredictability surrounding tariffs. CFO Paul Jacobson noted that the “future impact of tariffs could be significant,” and that GM would revisit its forecasts once more clarity is available.
Market reactions were mixed. GM shares dipped by more than 0.6% on Tuesday, while Ford, Toyota, Stellantis, and Honda all saw modest gains. The financial volatility reflects broader industry concerns that even softened tariffs could ripple through production costs, consumer pricing, and long-term planning.
Last week, a coalition of U.S. and international automakers penned a letter to the Trump administration urging tariff relief, warning that duties on auto parts could scramble global supply chains and drive up vehicle prices for consumers. That pressure appears to have played a role in the administration’s decision to amend its policy.
Political Optics and Future Risks
The timing of the announcement—just 100 days into Trump’s second term—highlights the political balancing act between asserting a tough stance on trade and maintaining domestic economic stability. While Trump has framed the tariff policy as a strategy to force companies to “make their parts here,” critics within the industry warn that such rigidity could backfire if cost pressures drive companies to cut jobs or scale back investment.
Trump’s latest move signals that, while tariffs remain a central feature of his economic agenda, his administration is willing to modify the approach in response to industry pushback. However, with the phaseout of reimbursements already planned, automakers may soon face renewed pressure to localize production or absorb higher costs.
As the global auto industry braces for further shifts, this temporary tariff easing offers a momentary reprieve—but also raises questions about how long the support will last and at what eventual cost.