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President Trump signed an executive order on Tuesday that will walk back some tariffs for carmakers, administration officials said, removing some levies that Ford, General Motors and others have complained would backfire on U.S. manufacturing by raising the cost of production and squeezing their profits.<\/p>\n
The changes will modify Mr. Trump\u2019s tariffs so that carmakers who pay a 25 percent tariff on auto imports are not subject to other levies, for example on steel and aluminum, officials said in a call with reporters Tuesday.<\/p>\n
Carmakers will also be able to qualify for tariff relief for a proportion of the cost of their imported components, though those benefits will be phased out over the next two years.<\/p>\n
Speaking on Tuesday before he left the White House, Mr. Trump said the administration wanted to help automakers \u201cenjoy this little transition, short-term.\u201d<\/p>\n<\/div>\n<\/div>\n
\u201cIf they can\u2019t get parts, we didn\u2019t want to penalize them,\u201d he said.<\/p>\n
The decision to reduce the scope of the tariffs is the latest sign that the Trump administration\u2019s decision to impose stiff levies on nearly all trading partners has created chaos and economic uncertainty for American companies. But, even with the concessions announced Tuesday, administration policies will add thousands of dollars to car prices and endanger the financial health of automakers and their suppliers, analysts said.<\/p>\n
On Tuesday, General Motors abandoned a previous forecast for solid profit growth this year as a result of the uncertainty created by Mr. Trump\u2019s trade policies. The carmaker, which sells more vehicles in the United States than any other company, said that any profit prediction would be a \u201cguess.\u201d<\/p>\n
\u201cThe prior guidance cannot be relied upon,\u201d Paul Jacobson, G.M.\u2019s chief financial officer, said during a conference call with reporters.<\/p>\n
The automaker also postponed a conference call with financial analysts to discuss its first-quarter results, citing the Trump administration\u2019s expected change to tariff policy. The company will now hold the call on Thursday.<\/p>\n
Mr. Trump is expected to sign the order on Tuesday to put the changes into effect. The order would come on the same day that Mr. Trump is scheduled to fly to Michigan, which is home to America\u2019s largest automakers, for a speech marking his 100 days in office.<\/p>\n<\/div>\n<\/div>\n
Automakers have welcomed any relaxation of tariffs, which they said would raise car prices, cause sales to fall and threaten their financial viability. But the steps will leave in place a 25 percent tariff on imported vehicles that took effect April 3, and a tariff on auto parts that will take effect on Saturday. That will still raise prices for new and used cars by thousands of dollars and increase the cost of repairs and insurance premiums.<\/p>\n
The move comes just weeks after the administration exempted smartphones, computers, semiconductors and other electronics<\/a> from its punishing China tariffs over concerns from companies like Apple that the import taxes would cause prices for U.S. consumers to skyrocket.<\/p>\n On Tuesday, Howard Lutnick, the commerce secretary, said that the changes stemmed from direct conversations with domestic automakers, and that the administration had been in \u201cconstant contact\u201d with the companies to analyze their business and make sure they got the policy exactly right.<\/p>\n \u201cDonald Trump and his presidency are going to bring domestic auto manufacturing back,\u201d Mr. Lutnick said.<\/p>\n Analysts have said that the policy will offer carmakers some relief, but that automakers will still face a substantial financial impact from the Trump administration\u2019s tariffs.<\/p>\n<\/div>\n<\/div>\n An official with the Commerce Department said in a call with reporters Tuesday that for the next year, automakers will receive an exemption from the 25 percent tariff on imported auto parts that is equal to 15 percent of a car\u2019s retail price. In the second year, the exemption will be offered for 10 percent of a car\u2019s retail price, but it will disappear in the third year.<\/p>\n With the reimbursement on tariffs for auto parts, for example, analysts at Barclays calculated that a $50,000 car could contain $1,875 worth of parts that would not be subject to tariffs during the first year.<\/p>\n The exemption buys carmakers some time, said Lenny LaRocca, U.S. automotive industry leader at consulting firm KPMG. \u201cIt gives them a little bit of time to plan out what their strategy could be,\u201d he said.<\/p>\n But automakers and suppliers say that three years is not enough time for them to reorganize their manufacturing operations. Even if they do, they will not be able to make many components as cheaply in the United States as they do elsewhere, which will lead to higher prices.<\/p>\n The latest rules also leave in place an exemption for parts imported from Canada and Mexico that comply with a treaty that Mr. Trump negotiated during his first term. Both countries are major suppliers to the U.S. auto industry.<\/p>\n<\/div>\n<\/div>\n Even cars manufactured in the United States typically use far more imported parts than would be covered by an exemption. Most cars also contain components from Japan, South Korea or China that will be subject to tariffs.<\/p>\n \u201cThe key tariff headwinds remain,\u201d Barclays analysts said in a report Tuesday.<\/p>\n Automakers will continue to be subject to other tariffs, for example the 2.5 percent tariff that is typically paid on imported cars. The administration has not yet made public the text of the executive order, and many other details remain unclear.<\/p>\n Carmakers will still pay tariffs on steel and aluminum indirectly. Their suppliers do not have an exemption and will pass on the cost of the duties to their customers, the automakers.<\/p>\n \u201cRelief today doesn\u2019t fix the longer-term challenge,\u201d analysts at Bernstein said in a note Tuesday. \u201cU.S. car prices are heading higher just as economic momentum fades.\u201d<\/p>\n Nevertheless, auto executives expressed gratitude that Mr. Trump had addressed at least some of their concerns. In a statement Monday, Mary T. Barra, the chief executive of General Motors, said that the company appreciated \u201cproductive conversations with the president and his administration.\u201d<\/p>\n<\/div>\n<\/div>\n \u201cThe president\u2019s leadership is helping level the playing field for companies like G.M. and allowing us to invest even more in the U.S. economy,\u201d she said.<\/p>\n \u201cStellantis appreciates the tariff relief measures decided by President Trump,\u201d John Elkann, chairman of the company that owns Dodge, Jeep, Ram and Chrysler said in a statement. \u201cWhile we further assess the impact of the tariff policies on our North American operations, we look forward to our continued collaboration with the U.S. administration to strengthen a competitive American auto industry and stimulate exports.\u201d<\/p>\n The executives also hinted that they hope continued talks with administration officials will lead to further concessions. \u201cWe will continue to work closely with the administration in support of the president\u2019s vision for a healthy and growing auto industry in America,\u201d Jim Farley, the chief executive of Ford, said in a statement.<\/p>\n The exemption appears to have been engineered in part by Mr. Lutnick, who has played a role<\/a> in securing lucrative exemptions for some industries in recent months. In a statement Monday, Mr. Lutnick called the deal \u201ca major victory for the president\u2019s trade policy.\u201d<\/p>\n The arrangement would reward companies \u201cwho manufacture domestically, while providing runway to manufacturers who have expressed their commitment to invest in America and expand their domestic manufacturing,\u201d Mr. Lutnick said.<\/p>\n Neal E. Boudette contributed reporting.<\/p>\n<\/div>\n<\/div>\n