Trump’s Executive Order Aims to Ease Burden of Stacked Auto Tariffs

In response to weeks of mounting pressure from automakers, parts suppliers, and dealers, US President Donald Trump signed two directives designed to soften the blow of overlapping tariffs on the automotive sector. These measures come amid growing concern that steep and overlapping import duties could lead to higher car prices, disrupt production, and threaten jobs across the US automotive supply chain.

Avoiding the “Stacking Effect” on Tariffs

The first executive order, signed aboard Air Force One, seeks to address the issue of cumulative tariffs. Imported vehicles had previously been subjected to separate tariffs on aluminium and steel, in addition to import duties on the finished cars themselves. This stacking effect, Trump stated, could result in an “excessive” duty rate, undermining the policy’s intent to bolster US manufacturing without unduly penalising the industry.

The order explicitly states that multiple levies “should not all have a cumulative effect,” recognising that the total burden might overshoot the administration’s targeted economic goals.

New Measures for Imported Auto Parts

The second directive involves a proclamation adjusting the 25% tariff on imported auto parts, set to take effect from May 3. To offer some temporary relief, carmakers manufacturing and selling completed vehicles within the United States can now claim an offset. This offset amounts to up to 3.75% of the value of American-made vehicles and is intended to partially cushion the cost impact.

This offset, however, will reduce to 2.5% in one year’s time and be phased out completely the following year. The intention behind this sliding scale is to incentivise greater domestic production in the long run. Notably, this benefit applies only to vehicles manufactured after April 3.

Read More: Indian Auto Exporters May Face ₹2,700-4,500 Crore Hit from US Tariffs: ICRA. 

A Temporary Reprieve, Not a Full Retreat

While these moves mark a partial step back from the original tariff framework, they are largely viewed as temporary. The relief on components is particularly time-bound, reflecting the administration’s continued goal of reshoring manufacturing jobs and reducing dependency on imports.

Nonetheless, industry voices have cautioned that if tariffs remain high in the long term, they could backfire, deterring investment, raising costs, and ultimately reducing competitiveness.

Conclusion

Even as the executive actions provide short-term clarity and financial relief, questions linger among automakers. Many remain uncertain about the longer-term implications of the policy changes and whether additional layers of regulation or tariffs may emerge in the future.

While the measures may momentarily stabilise operations and pricing structures, automakers are still calling for more consistent trade policies that enable long-term planning and investment.

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