U.S. President Donald Trump has signed an order easing the impact of his auto and parts tariffs on Tuesday, while removing the cumulative effect of tariffs, according to a White House statement.
The Trump administration said that overlapping tariffs applying to the same good would not have a cumulative effect, or “stack” on top of the other.
The White House also said it would offset a portion of tariffs for automobile parts used in U.S.-assembled vehicles equal to 3.75 per cent of the Manufacturer’s Suggested Retail Price of a manufacturer’s U.S. production for the next year. That rate would fall to 2.5 per cent the following year.
The administration said the move will “address the threat to national security” by reducing reliance on foreign manufacturing
Despite the remissions, a parts tariff still poses a serious threat to Canadian companies and workers, said the head of an industry association before the announcement.
“It appears that the president is preparing to counter the U.S. auto industry’s written request to remove the tariff threat on cars from Canada by making partial measures,” said Flavio Volpe, CEO of the Automotive Parts Manufacturers’ Association. “Partial measures that eat profits up and risk insolvency are not acceptable, the right level is zero tariffs.”
The Wall Street Journal first reported the move late Monday.
The head of the association representing non-U.S. auto manufacturers in Canada said the measures detailed by the Journal won’t fully mitigate the harm caused by tariffs.
“It’s a concern that they’re apparently still planning to bring in a parts tariff,” said David Adams, CEO of Global Automakers of Canada. “The remission might be helpful, but it’s not entirely clear how this will actually work.”
The North American automotive industry has been so integrated for so long, that trying to undo it will be a disaster across the continent, said Jim Stanford, chief economist at the Centre for Future Work. A few tweaks to tariffs here and there doesn’t change the bigger picture, Stanford added.
“I don’t think this solves the problem, it just delays the problem a bit on the supply-chain side,” said Stanford. “We’re still going to see thousands of job losses in Canada and more in America.”
The partial remission of parts tariffs is merely a panicked attempt to placate U.S. automakers, but it won’t ultimately work because it’s really only window-dressing, said Stanford.
“This announcement is a sign that Trump is under fierce pressure from American auto executives. He wants to throw them a bone while preserving the core of his strategy,” Stanford said.
The head of the Canadian Chamber of Commerce blasted the latest tariff news, saying it adheres to Trump’s chaotic style — and will still damage the entire North American auto industry.
“Whether the U.S. administration likes it or not, we’re in this together, and supply chains don’t heal quickly once broken,” said Chamber CEO Candace Laing.
The consequences of continued tariffs, said Laing, are clear.
“Tariffs just add taxes to the cost of completed cars, with auto parts and cars moving back-and-forth from facility to facility. The consequences: less employment, domestic and foreign investment, and retirement savings for future retirees,” Laing said.
Earlier in the day, U.S. Treasury Secretary Scott Bessent said Trump’s goal is still to bring auto manufacturing jobs back to the U.S.
“President Trump has had meetings with both domestic and foreign auto producers and he is committed to bringing back auto production to the U.S.,” Bessent said. “So, we want to give the automakers a path to do that quickly, efficiently and create as many jobs as possible.”
The announcement came less than a week after Trump threatened to increase auto tariffs for Canada.
Trump slapped a 25 per cent tariff on all cars and light trucks not made in the U.S., while also hitting automakers with 25 per cent duties on aluminum and steel. Starting Saturday, key auto parts are also set to be levied a 25 per cent tariff.
The full impact of the tariff relief on Canada’s auto industry isn’t immediately clear.
The Canadian industry received a partial carveout from Trump’s tariffs for vehicles compliant with the Canada-U.S.-Mexico Agreement (CUSMA) on trade. Canada has retaliated with a 25 per cent tariff on American-made cars imported to Canada, along with some carveouts for CUSMA-compliant vehicles.
The five companies that assemble cars in Canada will also be allowed to import a certain number of U.S.-assembled vehicles free of the counter-tariffs.
With files from The Canadian Press
More to come …
