WASHINGTON — The Trump administration will give automakers who build their cars in the United States a two-year grace period on tariffs, officials announced Tuesday.
A senior Commerce Department official said all car companies that complete assembly of their vehicles in the United States will be able to claim 15% of the manufacturer’s suggested retail price as an offset for one year and 10% of the MSRP as an offset for a second year.
The official estimates the offsets will result in increased shifts at U.S. auto factories as well as expansions of existing plants and newly built factories worth $100 billion in investment.
President Donald Trump is expected to sign an executive order that outlines his new auto tariff policy on board Air Force One on Tuesday afternoon.
The plan was developed through direct conversations with automakers — both domestic and foreign — that told the Trump administration they expect to be able to reshore their auto parts from foreign countries within two years.
Stressing that U.S. tariff policy is to protect and build American manufacturing, the official said all auto parts that come into the country are tariffed at 25%, but automakers who finish their cars in the United States will be able to claim the offset for vehicles they also sell in the United States.
Automakers will be able to claim 3.75% of their domestically made vehicles’ price in the first year and 2.5% of their domestically made vehicles' price in the second year. The offset rate is calculated by allowing automakers to take a 15% offset of the 25% auto and auto parts tariff in the first year and a 10% offset of the 25% tariff in the second year.
In effect, a U.S.-made car with 85% domestic parts effectively has no tariff, the official said.
The offsets are retroactive to April 3, when the auto tariffs first took effect.
Domestic automakers will not be subject to both a 25% steel or aluminum tariff and a 25% auto parts tariff. They can pick whichever tariff is higher when they claim the offset, which will be applied to the part at customs and will not be paid by the federal government.
Tuesday’s tariff relief announcement comes as automakers and independent analysts sounded alarms that the tariffs could increase prices, reduce sales and make U.S. production less competitive worldwide.
