Auto Parts Will Remain Tariff Exempt
The White House's revised auto tariff plan will completely exempt auto parts that comply with the US-Mexico-Canada Agreement (USMCA).
Key Points
- The 25% tariffs imposed on auto parts by the Trump administration do not apply to parts that comply with the US-Mexico-Canada Agreement (USMCA), providing relief to suppliers in Canada and Mexico.
- Auto industry companies can apply for a tariff offset for two years, allowing them time to shift parts production to the U.S. and mitigate the impact of the tariffs.
- While auto parts from USMCA-compliant suppliers are exempt from the tariffs, imported vehicles themselves are still subject to the 25% duties, which could lead to higher vehicle prices in the U.S.
The new play provides relief to parts suppliers in Canada and Mexico who were previously facing uncertainty after the Trump administration originally announced a 25% tariff on auto parts content that did not comply with USMCA standards—a calculation no one seemed quite sure how to tabulate.
The updated tariff policy ensures that USMCA-compliant parts will not face the 25% duty that is applied to other imported components. While parts from most other countries remain subject to the 25% tariff, this exemption provides some relief to automakers with established supply chains within USMCA territory.
Automakers such as GM and Ford have spent years aligning their supply chains to meet USMCA requirements and aggressively lobbied the administration to minimize tariffs on these parts. Additionally, the Trump administration has introduced a two-year application period for automakers to request offsets against parts tariffs, giving manufacturers additional time to shift parts production back to the U.S.
The tariff relief will not apply to cars produced internationally outside of USMCA territory and imported into the U.S.—those are still subject to the original 25% duty. Long-term, the policy is expected to encourage manufacturers to build more vehicles in the U.S., but for some automakers, it will likely take several years to establish a robust manufacturing footprint in North America, if at all.
Become an AutoGuide insider. Get the latest from the automotive world first by subscribing to our newsletter here.
An experienced automotive storyteller and accomplished photographer known for engaging and insightful content. Michael also brings a wealth of technical knowledge—he was part of the Ford GT program at Multimatic, oversaw a fleet of Audi TCR race cars, ziptied Lamborghini Super Trofeo cars back together, been over the wall during the Rolex 24, and worked in the intense world of IndyCar.
More by Michael Accardi
Comments
Join the conversation