WASHINGTON—Consumers and lenders shouldn't get too excited about President Trump's efforts to soften the impact of automotive tariffs, according to one automotive industry expert.
As CUToday.info reported, the Trump Administration is attempting to ease certain levies on imported components used in cars produced domestically, while also ensuring that tariffs on fully assembled vehicles from overseas do not compound with additional duties.
“This will mean that automakers subject to the automotive tariffs implemented by the Trump Administration will be exempt from additional duties, like those on steel and aluminum, reported Wall Street Journal.
Furthermore, this policy adjustment will be applied retroactively, allowing automakers to receive reimbursements for these tariffs they have previously paid. The 25% tariff on finished overseas-manufactured cars was put into effect in April, GlobalData noted.
The Administration plans to adjust its tariffs on imported auto parts, which, starting May 3, are imposed at a rate of 25%.
Under the new arrangement, automakers will have the opportunity to receive tariff reimbursements.
For the first year, they can be compensated for tariffs up to an amount that equals 3.75% of the value of a car manufactured in the US. In the second year, this reimbursement rate will decrease to 2.5% of the vehicle's value, before being completely phased out thereafter, GlobalData explained.
Kevin Tynan, director of research at The Presidio Group, told CUToday.info that Trump’s latest move is simply an adjustment to avoid duplicate tariffs on parts that are built into vehicles assembled in the U.S.
“The tariff scenario is still a supply constraint, which is inherently inflationary, so the action is a small tweak that provides some relief and lead time for automakers to build a US-based supply chain,” Tynan said.
In a recent CUToday.info report Tynan warned that consumers and lenders alike may be seeking longer terms for auto loans as tariffs drive car prices even higher. Tynan said that perspective has not changed.
In the report, Tynan shared some good news for lenders, emphasizing that while the number of auto deals will fall, prices of cars will move higher and help maintain lenders’ portfolio balances.