The White House is preparing to reduce tariffs affecting the U.S. auto industry, a significant development that is likely to benefit automakers who have been advocating for relief from the rising import duties. Sources indicate that the Commerce Department plans to announce a five-year extension of a provision that allows car manufacturers to lower their tariff payments on imported car parts, which was originally set to expire after two years.
This announcement could occur as early as this Friday, although similar tariff-related communications have sometimes faced delays. Details about the new policy are expected to be included in government documents that will also formally institute tariffs on imported trucks.
This initiative comes after extensive lobbying efforts by major carmakers, notably Ford Motor Co. and General Motors Co., seeking to alleviate the burdens imposed by President Donald Trump’s tariffs. The imposed levies on imported vehicles, parts, and materials—including steel and aluminum—have resulted in increased costs for U.S. automakers.
In response to the news, shares of General Motors rose by as much as 3.8%, while Ford and Stellantis NV, the parent company of Jeep, also experienced gains. Ford’s CEO, Jim Farley, pointed out that a trade agreement with Japan gives competitors like Toyota Motor Corp. a significant cost edge, amounting to thousands of dollars per vehicle, when accounting for Japan’s lower labor and currency expenses. This agreement effectively reduced tariffs on Japanese auto imports from 27.5% to 15%.
Previously, automakers were able to use a provision that allowed them to offset a portion of a 25% tariff on imported parts. Under this arrangement, companies producing and selling complete vehicles in the U.S. could claim an offset of up to 3.75% of the value of American-made cars. However, this offset was slated to decrease after one year to approximately 2.5%, with complete elimination anticipated in the subsequent year.
Earlier this year, President Trump implemented a 25% tariff on fully built vehicles, while separate tariffs on imports from Canada and Mexico already include exemptions for vehicles meeting specific domestic content criteria under the current North American trade agreement.
