3.75% Component Tariff Offset Based on MSRP… Temporarily Applied Until 2027
“Refund for Double-Paid Tariffs”… Relief via Steel and Border Adjustments
On the 29th (local time), the White House announced that President Trump signed an executive order aimed at “eliminating certain tariffs on imported goods” and issued a proclamation regarding the “adjustment amendment for imported automobiles and parts to the U.S.” Both documents are designed to ease the burden on automobile manufacturers.
President Donald Trump has officially announced an executive order and proclamation that aim to reduce the tariff burden on the automotive industry upon his 100th day in office. The measures will partially reduce tariffs on foreign parts for vehicles assembled in the United States and adjust steel, aluminum, and border-related duties to prevent double taxation, allowing for refunds.
According to the executive order, the 25% auto and parts tariffs imposed by President Trump will not overlap with existing tariffs on steel, aluminum, and border-related tariffs from Canada and Mexico. Even if the parts use foreign steel, only the automobile tariff needs to be paid, applying the highest single rate.
Retroactive application is allowed for double-paid tariffs. This applies from the 4th of last month, when border tariffs were implemented, and double-paid amounts will be eligible for a refund.
The proclamation also includes a temporary measure to offset component tariffs. For cars finally assembled in the U.S., from April 3rd this year to April 30th next year, 3.75% of the manufacturer’s suggested retail price (MSRP) is recognized as a credit for offsetting component tariffs. This rate will decrease to 2.5% from May 1, 2026, to April 30, 2027. This offset rate is calculated by applying a 25% tariff to components that account for 15% of MSRP, resulting in 3.75%.
The measure was developed in response to industry requests. Car manufacturers pleaded they needed time to establish a complete supply chain within the U.S., and President Trump is reported to have secured commitments for job creation, production expansion, and new plant establishments in exchange for granting a tariff adjustment period.
In a Q&A session with reporters, President Trump stated, “I wanted to help them (car companies) enjoy this short transition period” and added, “I did not want to penalize them for not being able to obtain parts.”
U.S. Treasury Secretary Scott Vessont stated at a White House briefing, “President Trump has held meetings with domestic and foreign car companies and is committed to bringing the automotive industry back to the United States, and easing car tariffs will significantly aid in reshoring U.S. automotive manufacturing.”
The relief measures can be utilized by both U.S. and foreign companies but are strictly applicable to vehicles finally assembled within the United States.
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