WASHINGTON 鈥� President Donald Trump signed executive orders Tuesday to relax some of his 25% tariffs on automobiles and auto parts, the White House said, a significant reversal as the import taxes threatened to hurt domestic manufacturers.
Automakers and independent analyses indicate that the tariffs could raise prices, reduce sales and make U.S. production less competitive worldwide.
"We just wanted to help them during this little transition, short term," Trump told reporters. "We didn鈥檛 want to penalize them."
Treasury Secretary Scott Bessent said the goal was to enable automakers to create more domestic manufacturing jobs.
"President Trump has had meetings with both domestic and foreign auto producers, and he's 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."
Trump signed one order on Tuesday that amended his previous 25% auto tariffs, making it easier for vehicles that are assembled in the U.S. with foreign parts to not face prohibitively high import taxes.
The amended order provides a rebate for one year of 3.75% relative to the sales prices of a domestically assembled vehicles. That figure was reached by putting the 25% import tax on parts that make up 15% of a vehicle's sales price. For the second year, the rebate would equal 2.5% of a vehicle's sales price, as it would apply to a smaller share of the vehicle's parts.
Consumer confidence down
Meanwhile, Americans' confidence in the economy slumped for the fifth straight month to the lowest level since the onset of the COVID-19 pandemic as anxiety over the impact of tariffs takes a heavy toll.
The Conference Board said Tuesday its consumer confidence index fell 7.9 points in April to 86, its lowest reading since May 2020. Almost one-third of consumers expect hiring to slow in the coming months, nearly matching the level reached in April 2009, when the economy was mired in the Great Recession.
The figures reflect a rapidly souring mood among Americans, most of whom expect prices to rise because of Trump's widespread tariffs. About half of Americans are also worried about the potential for a recession, according to a survey by The Associated Press-NORC Center.
鈥淩attled consumers spend less than confident consumers," said Carl Weinberg, chief economist at High Frequency Economics. 鈥淚f confidence sags and consumers retrench, growth will go down.鈥�
A measure of Americans鈥� short-term expectations for their income, business conditions and the job market plunged 12.5 points to 54.4, the lowest level in more than 13 years. The reading is well below 80, which typically signals a recession ahead.
How this gloomy mood translates into spending, hiring, and growth will become clearer in the coming days and weeks.聽
On Wednesday, the government will report on U.S. economic growth during the first three months of the year, and economists are expecting a sharp slowdown as Americans pulled back on spending after a strong winter holiday shopping season.
Automakers respond
General Motors CEO Mary Barra said the automaker is grateful for Trump's support of the industry, and she noted the company looks forward to conversations with the president and working with the administration.
"We believe the President's leadership is helping level the playing field for companies like GM and allowing us to invest even more in the U.S. economy," Barra said in a statement.
Jim Farley, president and CEO of Ford Motor Company, said his company does more than its peers to manufacture domestically.
"We will continue to work closely with the administration in support of the president's vision for a healthy and growing auto industry in America," Farley said.
But changing direction doesn't help an industry that thrives on stability, said Sam Fiorani, analyst at business forecasting firm AutoForecast Solutions.
"Finding a way to get the auto industry back working has to be paramount in this," Fiorani said. "The tariffs have not looked at this industry, the way it works, and expect it to be able to jump and relocate production at the blink of an eye. It just doesn't work that way.
"Making a production change for vehicle manufacturing takes minimum, months, and usually years, along with hundreds of millions if not billions of dollars," he added. "And so it is not something that they take lightly."
The tariffs imposed by Trump were seen by some as an existential threat to the auto sector. Arthur Laffer, whom Trump gave the Presidential Medal of Freedom to during his first term, said in a private analysis that the tariffs without any modifications could add $4,711 to the cost of a vehicle.
New vehicles sold at $47,462 on average last month, according to auto-buying resource Kelley Blue Book. Tariffs stress the automotive supply chain, a complex web which spans the globe. Not only do many auto parts cross North American borders several times before being assembled into a finished vehicle, auto manufacturers rely on suppliers around the world for thousands of components.
Increased levies would certainly cost new car buyers 鈥� sensitive to inflation 鈥� more, driving them to the used vehicle market and quickly straining the availability of pre-owned cars. Tariffs also impact the cost of owning and maintaining a vehicle.