President Donald Trump has signed an executive order that aims to alleviate some of the financial pressure on car manufacturers, suppliers, and consumers.
This development follows months of lobbying by industry leaders, who have warned that the combination of tariffs on vehicles, components, steel, and aluminium has driven up costs, threatened jobs, and created widespread uncertainty throughout the automotive sector.
The new executive order retains the 25% tariff on imported vehicles entering the United States, a measure originally justified by the administration as necessary for national security and the protection of American industry.
However, it addresses the issue of “stacking” tariffs, where additional duties on materials such as steel and aluminium were applied on top of vehicle and parts tariffs, compounding the financial impact on manufacturers. Under the new rules, this cumulative effect is to be reduced, offering some relief to companies that assemble vehicles domestically.
For automakers producing vehicles in the United States, the order introduces a system of partial reimbursements to offset the cost of tariffs on imported parts. Vehicles completed in U.S. factories before May 2026 are eligible for a reimbursement equal to 3.75% of their value, with the rate decreasing to 2.5% for vehicles assembled over the following year. This incentive is designed to encourage manufacturers to keep production within the country, rather than shifting it abroad to avoid tariff costs. Notably, this relief does not extend to vehicles assembled in Canada, Mexico, or China, reflecting the administration’s focus on American jobs and supply chains.
The announcement comes at a critical time for the industry, which has faced headwinds due to the unpredictability of trade policy. The previous system of overlapping tariffs had led to higher prices for consumers, disruptions in supply chains, and warnings from carmakers that further increases could force production cuts or layoffs.
Industry leaders have cautiously welcomed the new measures. Ford described the order as a step that would “help lessen the burden of tariffs on automakers, suppliers, and consumers.”
“We look forward to our ongoing partnership with the US administration to bolster a competitive American automotive industry and promote exports,” Stellantis Chairman John Elkann stated.
General Motors CEO Mary Barra also expressed gratitude, stating the changes were “helping level the playing field for companies like GM and allowing us to invest even more in the U.S. economy.”
The Trump administration has defended the new policy as a balanced approach that maintains pressure on foreign competitors while providing transitional support for domestic manufacturers. Commerce Secretary Howard Lutnick described the move as “a significant triumph for the President’s trade strategy by incentivising companies that produce domestically.”
The White House has also indicated that further adjustments may be possible as it continues to review the impact of tariffs on the economy.