Trump Eases Car Tariffs To Give Automakers Temporary Relief

United States House of Representatives - Office of Robert Aderholt, Public domain, via Wikimedia Commons

What’s Happening

U.S. President Donald Trump has temporarily relaxed tariffs on imported car parts, offering short-term relief to U.S. automakers. The move follows pressure from manufacturers who said they need more time to shift parts production back to the United States.

Driving The News

A new executive order allows U.S. car manufacturers to claim tariff rebates based on the value of their vehicles. Until April 30, 2026, automakers can deduct an amount equal to 3.75% of the price of a U.S.-made vehicle. After that, until April 30, 2027, the deduction drops to 2.5%.

Previously, a flat 25% tariff applied to all imported parts used in cars assembled in the U.S.

Key Changes

Tariff Reduction Tied To Car Price: Instead of paying 25% on all imported parts, automakers can now claim a rebate that effectively reduces or cancels the tariff, depending on how much of the vehicle is made from foreign parts.
Tariffs on Steel or Parts, Not Both: Automakers will now be taxed on either imported steel or imported auto parts, whichever results in a higher fee, not both at the same time, as before.
No Extra Cost To Taxpayers: According to the White House, the rebates come from collected tariffs and won’t impact public funds.

Why It Matters

Car manufacturers have long complained that the tariffs made it more expensive to produce vehicles in the U.S. Many still rely on imported parts, especially from nearby trade partners like Canada. The executive order gives them breathing room while they adjust their supply chains.

Trump said the goal was to avoid penalizing the industry during the transition. “We just wanted to help them during this little transition, short term,” he told reporters.

Behind The Numbers

The 3.75% rebate figure comes from this calculation: Imported parts make up about 15% of the average vehicle’s sale price. Multiply that by the 25% tariff = 3.75%. Example: A car that sells for $40,000, with $6,000 worth of imported parts (15%), would qualify for a full rebate, so no tariff would be paid. If imported parts exceed 15%, some tariffs would still apply.
In 2024, the U.S. had a $93.5 billion trade deficit in auto parts. About $19.5 billion of that came from Canada.

The Big Picture

Even with the relaxed tariffs, U.S. vehicle prices are expected to remain high. That's partly because manufacturing in the U.S. is still more expensive, mainly due to high healthcare costs for workers.

According to the Associated Press, the average new car price in the U.S. reached $47,462 last month. One analyst warned that the original 25% tariff could have added $4,711 to the price of a vehicle and increased the cost of ownership.