The Trump Administration announced it will reimburse a portion of the cost associated with its recent 25% tariffs to domestic car manufacturers beginning May 3.
According to Supply Chain Drive reports, updated executive order states that “automakers that assemble their vehicles in the U.S. can apply to offset up to 3.75% of their tariff costs related to auto imports for one year, retroactive to April 3. The available offset rate will drop to 2.5% for the next 12-month period and then be removed” adding that “the 3.75% rate was calculated based on the application of the soon-to-be implemented 25% auto parts tariff to vehicles made with 85% U.S. or United States-Mexico-Canada Agreement content, per the amended order.”
This scenario would mean that automakers would bypass tariffs on auto part imports for the next year.
President Trump also outlined that the Commerce Department has 30 days to create and implement a process for automakers to provide the necessary documentation to receive the cost offset.
The new order clarifies that current tariffs on imports of steel, aluminum, cars and non-USMCA-compliant goods will not stack on top of duties on auto parts.
"Automakers would welcome any exemption, but the volatility continues with the trade policy uncertainty," said Lenny LaRocca, U.S. auto industry leader at KPMG, in an email to Supply Chain Dive. "As we have seen, tariffs can be proposed and revised on short notice. That also doesn't change the broader business strategy questions facing automakers."
