Trump Eases Auto Tariffs, Says 'I Think We'll Have a Deal with India'
U.S. President Donald Trump made a major move to calm tensions in the world auto industry by signing two executive orders that mitigate the effect of his administration's controversial auto tariffs. The action provides a combination of tariff relief and credits designed to reassure automakers and soothe financial markets shaken by his mercurial trade policies. The move was made while he was in Michigan a hub of America's automotive industry mere days before new 25% tariffs on auto parts were set to kick in.
Trump's new actions provide automakers with a temporary reprieve by giving them more time to meet domestic content standards in U.S.-built vehicles. In particular, businesses are able to now count tariffs on imported car parts worth 3.75% of the value of a vehicle's Manufacturer's Suggested Retail Price (MSRP) for cars produced domestically through April 2026. That degrades to 2.5% for American production through April 30, 2027. The program, Trump stated, is set to assist the industry as it continues to attempt more domestic production. "We just wanted to help them. if they are unable to obtain parts, we did not want to punish them", he said while leaving Washington for Michigan.
But the reprieve does not apply to the wider 25% tariff on the 8 million cars the U.S. imports annually, which continues unabated. The White House described the action as a deliberate attempt to give 'breathing room' to carmakers in the face of rising fears about inflation, joblessness, and slowing economic growth. The president's action was greeted with guarded optimism by the auto industry, which had waged an intense lobbying campaign in recent weeks.
Autos Drive America, an association of large foreign automakers such as Toyota, Hyundai, and Volkswagen, also embraced the news, describing it as a move in the right direction. "But more must be done in order to turbocharge the U.S. auto industry", the association stated in a release. Not all responses were however favorable. Canadian Chamber of Commerce president Candace Laing also panned the action's narrow scope, saying, "Only an end to tariffs brings true relief. Continuous ups and downs continue uncertainty, and uncertainty sends business away from Canada and the U.S".
That uncertainty was highlighted the same day when General Motors withdrew its annual financial projection, even as it reported robust quarterly profits. The auto company also postponed an at-schedule analyst call, saying it needed to consider the most recent tariff revisions. The volatility of Trump's trade policies continues to have an effect on corporate planning and economic projections, with numerous businesses worldwide signaling worsening business conditions as a result of the trade climate.
At the same time, U.S. Commerce Secretary Howard Lutnick announced during a CNBC interview that the administration had negotiated an initial trade pact with a foreign country that may mitigate some of the intended retaliatory tariffs. While he wouldn't identify the nation, he said the deal was pending signature by that country's prime minister and parliament. Speculation accelerated when President Trump said, "India is coming along great.". I believe we'll have an agreement with India", indicating that India could be the partner in the outstanding agreement.
These developments provided a boost to financial markets. The S&P 500 Index closed 0.6% higher, its sixth day of increases in a row—the longest winning streak since November. Investors appeared to interpret Trump's partial retreat on auto tariffs and hints of international trade deals as a sign of potential stabilization in the White House's trade approach.
Yet analysts caution that the cheer may be temporary. Trump's ultimate aim still is shrinking the U.S. trade deficit for goods, which reached an all-time high last month as companies scrambled to import merchandise before threatened tariff increases take effect. Despite his administration setting out to finalize as many as 90 separate bilateral trade agreements during its 90-day grace period for implementing new tariffs, the prospects remain unclear.
The economic repercussions of the president's belligerent trade agenda are beginning to emerge. UPS said it would eliminate 20,000 jobs in a cost-cutting measure, and big brands such as Kraft Heinz and Swedish appliance manufacturer Electrolux referred to the tariffs as major roadblocks to their business forecasts. Over 40 companies worldwide have either reduced or canceled their earnings estimates in the first half of the first-quarter earnings season, as per a Reuters analysis. Electrolux CEO Yannick Fierling captured the mood succinctly, saying, "Every single prediction has been proved to be wrong. I'm surprised if people are claiming they have a view where tariffs are going."
Public faith in Trump's economic stewardship seems to be declining. A Reuters/Ipsos poll published Tuesday revealed that just 36% of those surveyed agreed with his economic policies, a record low approval rating for Trump since the beginning of his second term. The timing of the most recent tariff changes, a week before publication of the first U.S. GDP report in his current term, underscores intensifying pressure on the administration. Economists polled by Reuters predict the economy grew at a weak 0.3% year-on-year pace in January-March, down sharply from 2.4% in the last quarter of 2024. The slowdown is largely due to the front-loading of imports as companies and consumers sought to beat upcoming duty hikes.
As Trump approaches the 100th day of his second term, his contradictory messages on trade remain echoing through the world economy. Though his most recent orders bring fleeting respite to automakers, the more fundamental question is still unresolved: will the U.S. step back from protectionism or double down on efforts at reshoring and bilateral agreements? For the moment, companies, investors, and trading partners are left to operate in a universe characterized by uncertainty.
