President Donald Trump has signed an executive order and proclamation to ease the impact of auto tariffs, marking another abrupt shift in the administration’s evolving trade policy. While the 25% tariff on imported cars will remain in place, and a new 25% tariff on imported auto parts will take effect as planned this weekend, the new directives introduce significant relief measures for automakers.
Under the new policy, automakers will receive rebates of up to 15% on tariffs paid for imported auto parts over the next two years. Specifically, the order provides a one-year offset equal to 3.75% of a vehicle’s value (calculated as 25% of 15% of the vehicle’s value), which will be reduced to a 2.5% offset in the second year, applying to 10% of the vehicle’s value. This relief is designed to help automakers transition as they expand domestic supply chains and production capacity.The executive order also ends the practice of “tariff stacking,” ensuring that the new 25% tariff on auto parts will not overlap with existing tariffs on steel, aluminum, or certain Canadian and Mexican goods, thus avoiding redundant taxation. The order is retroactive, allowing automakers to claim refunds for any duplicate tariffs already paid.
Additionally, the administration will offer a credit of 3.75% of the Manufacturer’s Suggested Retail Price (MSRP) for all vehicles assembled in the United States between April 3, 2025, and April 30, 2026. This credit can be applied to an equal value of duty-free parts imports, except those from China.
Commerce Secretary Howard Lutnick stated that these measures recognize the time required for automakers to shift supply chains and are intended to support the domestic industry without penalizing companies unable to source parts immediately. The relief applies to both U.S. and foreign automakers, aligning with the administration’s broader goal of revitalizing domestic automobile manufacturing.
However, other tariffs-including the 145% duties on Chinese goods and the standard 2.5% “Most Favored Nation” rate for automotive imports-will remain in effect.
Trump’s decision, made after consultations with major auto industry executives, is intended to provide short-term relief and stability for automakers as they adapt to the new trade environment.