US Commerce Secretary Howard Lutnick confirmed on Monday that a deal has been reached with automakers to ease tariffs, marking a potential policy reversal that could provide significant relief to a struggling industry.
According to a report from the Wall Street Journal, President Donald Trump is expected to announce a new tariff structure for imported cars that will not add to the existing tariffs. Currently, imported cars face a 25% tariff, alongside a 25% tariff on steel and aluminium, materials essential to car manufacturing.
Lutnick called the deal a “major victory” for the President’s trade policy. He emphasised that the agreement rewards companies that manufacture domestically and offers a path for manufacturers committed to expanding production in the U.S.
“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,” Lutnick said in a statement to CNN.
However, no specific details were provided about the agreement’s terms. A White House official told Reuters that the deal would be finalised on Tuesday, when Trump is scheduled to visit Michigan to mark the first 100 days of his second term in office. This is a significant moment for the American automobile industry, as Michigan has long been the heart of car manufacturing in the United States.
Automakers, car dealers, and buyers have all been on edge about the potential impact of tariffs. Experts warn that the 25% tariff on imported cars could increase the cost of manufacturing and importing vehicles by thousands of dollars, leading to higher prices for consumers.
Additionally, the supply of vehicles available for sale could be reduced. The situation is further complicated by the administration’s plans to impose tariffs on auto parts starting this Saturday, which could raise prices even more, as every car built in the U.S. contains some imported components.
The auto industry has been vocal in lobbying for relief from these levies, fearing that they could have a profound impact on American finances and disrupt the supply chains of automakers. General Motors’ CEO, Mary Barra, expressed gratitude for the President’s actions, 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.” She added that the President’s leadership was helping level the playing field for companies like GM, enabling them to invest more in the U.S. economy.
Shares of automakers, particularly those based in Asia, surged following the announcement. Toyota, the world’s largest carmaker, saw its stock rise by 3.6%, while Honda and Nissan also saw gains of 1% and 2.3%, respectively. In South Korea, Hyundai and its affiliate Kia also experienced increases in their share prices.
The tariffs have caused major concerns for automakers, dealers, and suppliers, who have warned that they will lead to higher prices, reduced sales, and disruptions in vehicle repairs and servicing. A coalition of U.S. and international automakers had previously written to the Trump administration, requesting relief from the tariffs, citing the potential disruption to the global supply chain.
“Tariffs on auto parts will scramble the global automotive supply chain and set off a domino effect that will lead to higher auto prices for consumers, lower sales at dealerships, and make servicing and repairing vehicles both more expensive and less predictable,” the letter stated.
In the face of these challenges, many automakers are struggling to deal with the financial strain that the new tariffs could bring. Some auto suppliers are already facing significant distress, with the potential for production stoppages, layoffs, and even bankruptcy if the tariffs are fully implemented.
With new tariffs on auto parts set to take effect this weekend, the industry remains on edge. However, the news that the 25% tariff could be significantly reduced has brought some relief. According to reports, automakers could even receive refunds for the tariffs paid on parts that will no longer be subject to taxation. This is a step that could help alleviate some of the financial burden caused by the tariffs.
Despite the changes, the Trump administration has a history of reversing tariff policies, meaning the new agreement could still be subject to change. Additionally, reports indicate that automakers will be reimbursed for a portion of the costs incurred due to the previous tariffs, up to 3.75% of the car’s value in the first year. However, this reimbursement will be phased out over two years.
Earlier in April, President Trump expressed openness to exempting some automakers from the tariffs, allowing them more time to build up their U.S. manufacturing facilities. This approach has provided some hope to the auto industry, which has faced a period of uncertainty and high costs due to the ongoing tariff dispute.
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