Trump says order to soften auto tariffs' impact will give a 'little relief' to industry
Move announced on day U.S. leader was going to Michigan, the cradle of the U.S. auto industry
U.S. President Donald Trump signed an order to soften the blow of his auto tariffs on Tuesday with a mix of credits and relief from other levies on materials, and his trade team touted its first deal with a foreign trading partner, developments that eased investor worries about Trump's erratic trade policies.
The change comes the day Trump was headed to Michigan, cradle of the U.S. auto industry, and just days before a fresh set of 25 per cent import taxes was set to kick in on automotive components. The trip, on the eve of his 100th day in office, comes as Americans take an increasingly dim view of Trump's economic stewardship, with indications his tariffs will weigh on growth and could drive up inflation and unemployment.
In his latest partial reversal of tariff policies, the Republican president agreed to provide carmakers with credits for up to 15 per cent of the value of vehicles assembled domestically. These could be applied against the value of imported parts, allowing time to bring supply chains back home.
Auto industry leaders had lobbied the administration furiously during the weeks since Trump first unveiled his 25 per cent tariffs on imported vehicles and auto parts. The levies, aimed at forcing automakers to reshore manufacturing domestically, had threatened to scramble a North American automotive production network integrated across the U.S., Canada and Mexico.
It offers the industry a "little relief" as companies invest in more U.S. production, Trump said as he left Washington for Michigan.
"We just wanted to help them ... if they can't get parts, we didn't want to penalize them."
The uncertainty unleashed across the auto sector by Trump's tariffs remained on full display Tuesday when GM pulled its annual forecast even as it reported strong quarterly sales and profit. In an unusual move, the automaker also opted to delay a scheduled conference call with analysts until later in the week, after the details of tariff changes were known.
Meanwhile, U.S. Commerce Secretary Howard Lutnick told CNBC he had reached one deal with a foreign power that should permanently ease the "reciprocal" tariffs Trump plans to impose. Lutnick declined to identify the country, saying the deal was pending local approvals.
Lutnick's comments helped further lift stock prices that had been battered by Trump's moves to reshape global trade and force goods makers to shift production to the U.S. The benchmark S&P 500 Index closed 0.6 per cent higher for a sixth day of gains, its longest streak of gains since November.
Rollbacks will have minimal impacts: experts
Sam Fiorani, an auto industry analyst at AutoForecast Solutions, says reducing some of the stacked auto, metal and general tariffs will likely come as a bit of a relief to the industry — even if they're still paying considerable tariffs.
But overall, he says these rollbacks are small and won't likely change much, nor will they do anything to stabilize the uncertain economic times with which automakers have been grappling.
"These are moving targets, so there's always a new question every time anybody sends an email, opens their mouth, whatever it is. So ... concrete answers just aren't there yet and simply signing an executive order doesn't do much more," Fiorani said.
And while some of the rollbacks attempt to give automakers some time to bring manufacturing back to the U.S., Fiorani says the measures still don't take into account just much time and money it really takes to change supply chains.
The measures will also be of little benefit to Canada, Fiorani says, given they are targeted to bring auto manufacturing to the U.S. specifically.
Flavio Volpe, president of the Automotive Parts Manufactures' Association, said partial rollbacks like these are not good enough in such an interconnected industry.
"Partial measures that eat profits up and risk insolvency are not acceptable, the right level is zero tariffs," Volpe told CBC News in an email.
So far, Canada's auto industry has received partial carve-outs from Trump's tariffs for vehicles compliant with the Canada-U.S.-Mexico Agreement on trade, called CUSMA. The current duties only hit the value of the non-American parts of vehicles finished in Canada.
Trump has claimed Canada is taking U.S. automobile jobs, but the two countries have been developing the industry in tandem since the early 1900s. Integration was deepened with the 1965 Auto Pact trade deal between Canada and the U.S.
Automakers respond positively, but volatility remains
General Motors CEO Mary Barra, Ford CEO Jim Farley and Stellantis chair John Elkann praised the planned changes ahead of Trump's signing of the new order.
"We believe the president's leadership is helping level the playing field for companies like GM and allowing us to invest even more in the U.S. economy," Barra said.
Farley said the changes "will help mitigate the impact of tariffs on automakers, suppliers and consumers."
Elkann said Stellantis looked forward to continued collaboration with the Trump administration "to strengthen a competitive American auto industry and stimulate exports."
Last week, a coalition of U.S. auto industry groups urged Trump not to impose 25 per cent tariffs on imported auto parts, warning they would cut vehicle sales and raise prices.
Trump had said earlier he planned to impose tariffs of 25 per cent on auto parts no later than May 3.
"Tariffs on auto parts will scramble the global automotive supply chain and set off a domino effect that will lead to higher auto prices for consumers, lower sales at dealerships and will make servicing and repairing vehicles both more expensive and less predictable," the industry groups said in the letter.
The letter from the groups representing GM, Toyota, Volkswagen, Hyundai and others was sent to U.S. Trade Representative Jamieson Greer, U.S. Treasury Secretary Scott Bessent and Lutnick, the U.S. commerce secretary.
"Most auto suppliers are not capitalized for an abrupt tariff induced disruption. Many are already in distress and will face production stoppages, layoffs and bankruptcy," the letter added, noting "it only takes the failure of one supplier to lead to a shutdown of an automaker's production line."
With files from CBC's Abby Hughes and The Canadian Press
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