Trump, Decision to waive parts tariffs for 2 years for automobile manufacturers in the US
On the 29th (local time), President Donald Trump of the United States attended the 100-day inauguration commemorative event (Source: AFP)
President Donald Trump of the United States signed a new executive order reducing the tax burden on imported parts for automobile manufacturers, allowing domestic auto production companies to be exempt from the 25% tariff on parts up to a maximum of 15% over the next two years. This measure acknowledges to some extent the method of sourcing parts from abroad and assembling cars in the United States, aiming for the recovery of American manufacturing.
The White House announced on the 29th (local time) that President Trump officially signed a proclamation and executive order containing these details. As a result, the United States will compensate by offsetting tariffs on imported parts equivalent to 15% of the car price from April 2025 to April 2026, and from May 2026 to April 2027, the standard will be reduced to 10%.
In the first year, automakers can use 3.75% of the total Manufacturer's Suggested Retail Price (MSRP) of vehicles for tariff offset, and in the second year, the ratio is reduced to 2.5%. This ratio is calculated by multiplying the tariff waiver target ratio among the total parts by the 25% tariff rate.
President Trump stated regarding this measure, "I did not want to penalize companies for failing to source parts," and a senior official explained, "Automakers have stated that building a complete domestic supply chain takes time." The Trump administration is accepting these industry requirements, allowing partial use of imported parts, but gradually encouraging the increase of self-sufficiency rates in the future.
This easing measure is equally applicable not only to American companies but also to foreign automakers like Hyundai and Kia that have factories in the United States. However, full tariff exemptions are possible only for vehicles with a parts self-sufficiency rate of 85% in the first year and over 90% in the second year. The U.S. government is through this strategy aiming to strengthen incentives for domestic production and induce supply chain expansion.
Additionally, a duplicate tariff prevention clause is included. President Trump, in a separate executive order, ensured that tariffs on automobiles and automobile parts do not overlap with tariffs applied to steel, aluminum, and products from Canada and Mexico. However, it was clarified that automobile tariffs and tariffs imposed on Chinese products can be applied concurrently.
The announced tariff reduction plan is retroactively applied, allowing companies that have already paid overlapping tariffs to receive refunds. It is reported that President Trump, in exchange for conducting tariff reductions, obtained promises for job creation and production expansion from major companies like Ford, GM, and Stellantis.