Exclusive: Trump considering significant tariff relief for US vehicle production, senator says

U.S. President Trump is reportedly considering significant tariff relief for domestic auto production, proposing to extend a 3.75% import adjustment offset for five years and expand it to U.S. engine production. This measure, aimed at incentivizing U.S. manufacturing and job creation, would effectively eliminate substantial tariff costs for major automakers with final assembly in the U.S., such as Ford, Toyota, and GM, which have previously faced billions in tariff-related expenses. Automakers' shares saw gains on the news, though a White House official noted the proposal remains speculative until formalized, signaling a continued focus on securing domestic auto production.

Analysis

WASHINGTON, Oct 3 (Reuters) - U.S. President Donald Trump is considering significant tariff relief for U.S. auto production that could effectively eliminate much of the costs major car companies are paying, Republican Senator Bernie Moreno and auto officials told Reuters on Friday. "The signal to the car companies around the world is look, you have final assembly in the U.S.: we're going to reward you," Moreno said in an interview. "For Ford (F.N), for Toyota (7203.T), for Honda (7267.T), for Tesla (TSLA.O), for GM (GM.N), those are the almost in order of the top five domestic content vehicle producers - they'll be immune to tariffs." Stay up to date with the latest news, trends and innovations that are driving the global automotive industry with the Reuters Auto File newsletter. Sign up here. Advertisement · Scroll to continue Moreno, a former car dealer, serves on the Senate Commerce Committee that oversees auto issues and is active in automotive policy matters. Automakers' shares rose on the news first reported by Reuters. Ford closed up 3.7%, Chrysler-parent Stellantis rose 3.2% and GM closed up 1.3%. The extended tariff relief -- if finalized -- would give automakers more incentive to move car production to the United States, which would fulfill a key Trump policy aimed at creating more jobs for Americans. The Commerce Department said in June that it planned an import adjustment offset equal to 3.75% of the suggested retail price for eligible U.S. assembled vehicles through April 2026 and then a second year at 2.5% to address tariffs from imported automobile parts. Advertisement · Scroll to continue Trump is considering keeping the offset at 3.75% and extending the length of the credit to five years, and expanding the offset to U.S. engine production, Moreno and auto officials said. Moreno said he thinks Trump will make a final decision soon. "It's obviously up to the president, but (I'm) absolutely thrilled that we're creating now an incentive system that really separates these importer only versus the ones that are manufacturing in America." Moreno added automakers with significant final production in the United States should get tariff breaks: "Look, at the end of the day, they're doing exactly we want them to do - paying employees in America well and doing final assembly in the United States with the cars that they sell here." Asked for comment on the proposal, a White House official told Reuters that Trump and the administration "are committed to a nuanced and multi-faceted approach to securing domestic auto and auto parts production. Until any official action is signed by the president, however, any discussion about administration policymaking is speculative." In May, Trump imposed 25% auto tariffs on more than $460 billion worth of imports of vehicles and auto parts annually, but has since struck deals to reduce those tariffs on some countries including Japan, the United Kingdom and the European Union. The Commerce Department said in August that it was hiking steel and aluminum tariffs on more than 400 products including numerous auto parts totaling $240 billion in annual imports. The parts include automotive exhaust systems and electrical steel needed for electric vehicles as well as components for buses. The automakers did not immediately respond to requests for comment. One open question is whether the automakers will be able to apply the relief to the impact of aluminum and steel tariffs. Separately, the Trump administration has delayed finalizing new tariffs on heavy-duty trucks that were set to take effect this week it considers the extent to which it will impose new 25% levies. GM said earlier this year the company will face up to $5 billion in gross tariff-related costs this year, while Ford (F.N) cited a $3 billion gross hit. Reporting by David Shepardson; Editing by Chizu Nomiyama and Anna Driver Our Standards: The Thomson Reuters Trust Principles. The Trump administration is actively considering a significant alteration to its trade policy for the automotive sector by extending and expanding tariff relief for domestic production. The proposal involves maintaining a 3.75% import adjustment offset for a five-year period, a notable extension from the planned two-year phase-down, and expanding the credit to include U.S. engine production. This policy is explicitly designed to incentivize U.S. final assembly, directly benefiting companies like Ford, GM, Toyota, Honda, and Tesla. The financial implications are substantial, as the relief would counteract existing tariff burdens that have been estimated to cost GM up to $5 billion and Ford $3 billion in gross terms annually. Investor reaction was immediately positive, with Ford's stock rising 3.7%, Stellantis 3.2%, and GM 1.3% on the news. However, the proposal's finalization remains uncertain; a White House official characterized the discussions as "speculative," and it is unclear if the relief will apply to the separate, costly tariffs on imported steel and aluminum parts.

Key Decisions for Investors

• The potential tariff relief represents a significant positive catalyst for automakers with high domestic production content, such as Ford and GM, and investors should monitor for official confirmation as it could materially improve their cost structures and earnings outlook.
• Consider overweighting exposure to U.S.-centric automakers relative to import-heavy competitors, as the proposed policy is designed to create a direct cost advantage for companies with significant final assembly and engine production within the United States.
• While the news is positive, investors must hedge against policy risk, as the proposal is still speculative and its failure to be enacted, or a narrow application that excludes steel and aluminum tariffs, could lead to a reversal of recent share price gains.