Trump administration to extend tariff relief for automakers
What's the story
The White House is preparing to ease tariffs on the US auto industry, a move that could benefit major car manufacturers like Ford and General Motors (GM). The Commerce Department is expected to announce a five-year extension for an arrangement allowing automakers to reduce their tariff payments on imported car parts, according to Bloomberg. This provision was originally set to expire after two years.
Anticipated details
Tariff relief after months of lobbying by carmakers
The announcement of this tariff relief is likely to come soon and will be detailed in government documents. These documents will also formally implement tariffs on imported trucks. The concession comes after months of lobbying by carmakers such as Ford and GM, who have been seeking relief from President Donald Trump's tariffs on imported vehicles, parts, and materials like steel and aluminum.
Stock impact
Positive impact on automaker stocks
The news of potential tariff relief has already started affecting the stock market. GM shares rose by as much as 3.8% on the news, while Ford and Stellantis NV also saw a rise in their stocks. This is a positive development for these companies as they continue to navigate through the challenges posed by high import duties and other tariffs imposed by President Trump.
Trade implications
Competitors gaining due to US-Japan trade deal
Ford CEO Jim Farley has pointed out that the US-Japan trade deal gives competitors like Toyota a cost advantage of thousands of dollars per vehicle over their US-made counterparts. This is due to Japan's lower labor and currency costs. The deal reduced tariffs on Japanese auto imports from 27.5% to 15%.
Tariff history
Previous measures and Trump's tariffs
Under previous measures, automakers could offset part of a 25% tariff on imported parts. This offset was applicable to carmakers producing and selling completed automobiles in the US. However, it was set to reduce after one year to about 2.5%, before being phased out in the following year. Earlier this year, Trump imposed a separate 25% tariff on fully built vehicles imported from other countries.