US president Donald Trump has offered relief to carmakers in the form of tariff rebates while clearing up some uncertainty on tariff stacking.
According to a White House executive order, carmakers can appply for tariff rebates or “offsets” depending on how much of a vehicle and its parts was made in the US.
If an OEM assembles vehicles in the US (with vehicles having 85% US content, or USMCA compliant content), they can apply to offset up to 3.75% of the tariffs on parts for one year, retroactive to April 3. This offset rate would then drop to 2.5% in the second year, before being removed completely.
View our tariff timeline infographic here
It is not yet clear how quickly the OEMs could receive approval for these tariff offsets, or what documentation they would need to provide. The US Commerce Department has 30 days to establish this process. While the tariff offsets may offer some relief to carmakers, the complexity of the rules around tariff stacking and getting approval on offsets only adds to the uncertainty the industry is facing.
In response to the announcement from Trump, several carmakers including Stellantis, Mercedes and Polestar, have paused or pulled their financial guidance.
In a separate order, the White House aimed to clarify which tariffs could be stacked. Automotive Logistics understands that the tariffs for non-USMCA compliance, which at first were thought to reach as high as 52.5%, could now be dropped to 27.5%, covering the 25% vehicle import tariff and the existing 2.5% duty for non-USMCA compliance.
The order said that tariffs covering imported vehicles, and imported automotive parts, will not be subject to the 25% tariffs on steel and aluminium imports.
This effectively means, according to Automotive Logistics’ interpretation of the White House release, that vehicle imports to the US will have 25% tariffs applied, and automotive parts imports to the US will face 25% tariffs from tomorrow (May 3) but will not have 25% tariffs on steel and aluminium stacked on top of this. However, the International Emergency Economic Powers Act (IEEPA) tariffs of 25% on imports to the US from Mexico and Canada could still be stacked.
In the order, Trump stated: “I have now determined that, to the extent these tariffs apply to the same article, these tariffs should not all have a cumulative effect or “stack” on top of one another because the rate of duty resulting from such stacking exceeds what is necessary to achieve the intended policy goals.”
We will update this article with more information when it becomes available…
No comments yet