US automakers will get some relief from US President Donald Trump’s tariffs, according to a new White House fact sheet. Prior to his new executive order, manufacturers had to pay a 25 percent tariff on any parts used in any US-assembled vehicles. Now, they’ll be able to deduct up to an amount equal to 3.75 percent of the price of a new US made car until April 30, 2026, and 2.5 percent until April 30, 2027. In addition, automakers will only be required to pay tariffs on steel or auto parts (not both as before), depending on which is higher.
The new rules reportedly came at the request of manufacturers, who said they need time to move parts production to the US. “We just wanted to help them during this little transition, short term. We didn’t want to penalize them,” Trump told reporters.
The 3.75 percent figures was reached by multiplying 15 percent of imported parts that make up a vehicle’s sale price by the current 25 percent import tax. So if a $40,000 car had $6,000 or 15 percent of imported parts, the manufacturer would effectively pay no tariffs, but any higher percentage of foreign parts would result in some tariff being paid. The White House said the rebates wouldn’t cost taxpayers anything since they’d come out of tariffs collected.
The White House pointed out that the US trade deficit on auto parts was $93.5 billion in 2024. A large chunk of those ($19.5 billion worth) came from Canada, and large numbers of US vehicles are also built in that country. However, the reason that US automakers manufacture cars and car parts in Canada is because it’s cheaper, largely because of the high cost of employee healthcare in the US. So, even if automakers manufacture more parts in the US, car prices are still likely to go up.
The average price for a new vehicle in the US was $47,462 last month, according to The Associated Press. One noted analyst predicted that the original 25 percent tariffs could add $4,711 to the cost of a vehicle, while also boosting the cost of ownership and maintenance.
