During a rally in Warren, Michigan, President Trump announced a partial easing of tariffs impacting the automotive industry. The move, which he described as a “short-term” transition, was designed to offer temporary relief to automakers while encouraging the return of manufacturing to the U.S. Despite the adjustment, the tariffs are still expected to result in higher costs for consumers on cars, parts, repairs, and insurance.
New Tariff Rules Limit Stacking, Offer Relief for Cross-Border Auto Manufacturing Chains
Although the 25 percent tariff on imported cars and the upcoming tariff on auto parts remain intact, the executive order modifies how those tariffs are applied. Previously, parts and vehicles could be subject to multiple overlapping import taxes, known as “stacking.” The new rule limits this to only the highest applicable tariff. This change aims to simplify and slightly reduce the financial burden for manufacturers involved in complex, cross-border supply chains.
Trump’s Tariff Shift Eases Auto Industry Pressure but Keeps Consumer Costs on the Rise
The new rules especially benefit automakers using international assembly processes. For example, parts like aluminum may cross the U.S. border multiple times during vehicle production. Under the new policy, only the final assembled component, such as a powertrain, would incur the highest single tariff, not each of the imported parts used in its construction. Additionally, vehicles that meet 85 percent USMCA content requirements continue to be exempt from tariffs altogether.
Tariff Credits Offer Limited Relief as Auto Costs Continue to Climb Nationwide
Trump’s order also introduces a limited credit for automakers using imported parts in U.S.-assembled vehicles. Beginning May 3, they can receive a credit up to 3.75 percent of a car’s MSRP, dropping to 2.5 percent the following year, before being phased out entirely. This is intended to give companies time to transition their supply chains domestically. However, estimates show the savings will only partially offset the added costs—for example, just $900 of a potential $4,000 tariff on a Ford Explorer.
Despite the rollback, tariffs will continue to drive up costs for both automakers and consumers. The price of replacement parts will remain high, raising the cost of repairs and insurance, not just new vehicle purchases. Without a broader change in trade policy, American drivers are likely to bear the financial brunt of these tariffs, whether they’re buying new cars or maintaining old ones.
