Trump's 'Significant Reversal' on Auto Tariffs

President Trump signed an executive order on Tuesday to relax some of his 25% tariffs on autos and auto parts, a significant reversal as the import taxes threatened to hurt domestic manufacturers. Automakers and independent analyses have indicated that the tariffs could raise prices, reduce sales, and make US production less competitive worldwide, per the AP. The Wall Street Journal reports that the order involves changes in how the import taxes would be enforced to prevent multiple tariffs stacking up on foreign-made vehicles. The changes are retroactive, meaning automakers will be reimbursed for some tariffs already paid.

Under the order, imported tariffs not covered by trade deals with Canada and Mexico will still face 25% tariffs, but automakers will be reimbursed for up to 3.75% of a car's value, CNBC reports. After a year, that will fall to 2.5%. Treasury Secretary Scott Bessent said the goal was to enable automakers to create more domestic manufacturing jobs. "President Trump has had meetings with both domestic and foreign auto producers, and he's committed to bringing back auto production to the US," Bessent said. "So we want to give the automakers a path to do that, quickly, efficiently, and create as many jobs as possible." Later Tuesday, Trump said, "It's a little bit of help. We just wanted to help them enjoy this little transition, short-term."

The tariffs imposed by Trump were seen by some as an existential threat to the auto sector. Arthur Laffer, whom Trump gave the Presidential Medal of Freedom to during his first term, said in a private analysis that the tariffs without any modifications could add $4,711 to the cost of a vehicle. It remains unclear what impact Trump's broader tariffs will have on the US economy and auto sales. Most economists say the tariffs—which could ultimately hit most imports—would raise prices and slow economic growth, possibly hurting auto sales despite the relief that the administration intends to offer on its previous policies. This story has been updated with new developments. (More tariffs stories.)