U.S. President Donald Trump has reportedly agreed to soften the impact of tariffs on automakers by letting off some of his wide-ranging levies, U.S. media reported on Monday, sending the markets rising on Tuesday ahead of the official announcement.
The move comes ahead of a Trump rally planned for Tuesday night near Detroit, marking the president's first 100 days in office. The move to ease the effects of auto levies is the latest by his administration to show some flexibility on tariffs, which have sown turmoil in financial markets, created uncertainty for businesses and sparked fears of a sharp economic slowdown.
The shift means companies paying 25% tariffs on car imports won't also have to pay other duties, such as those on steel and aluminum, according to The Wall Street Journal (WSJ), which was the first to report the shift.
The administration is also allowing some reimbursements for foreign auto parts, levies that were supposed to take effect on May 3, according to the Journal, citing unnamed sources.
A White House official confirmed the report and indicated the move would be made official on Tuesday.
Similarly, a month that began with the explosion of Washington's "Liberation Day" tariffs on April 2 was on track for a more positive close, as governments also lined up to cut deals to avert the full force of the measures.
U.S. automakers have been among the hardest-hit sectors because the tariffs affect imports from Mexico and Canada.
Detroit carmakers continued to invest in those markets after Trump renegotiated the North American Free Trade Agreement (NAFTA) during his first term.
Analysts have warned that the tariffs could lead to higher prices, which would dent U.S. car sales and threaten jobs.
Commerce Secretary Howard Lutnick said Trump was "building an important partnership," according to the Journal.
"This deal will be a major victory for the president's trade policy by rewarding companies who are already manufacturing domestically, while providing a runway to manufacturers who have expressed their commitment to investing in America and expanding domestic manufacturing," Lutnick said.
U.S. automakers welcomed the planned change.
General Motors CEO Mary Barra and Ford CEO Jim Farley praised the planned changes. "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.
Farley said the changes "will help mitigate the impact of tariffs on automakers, suppliers and consumers."
Last week, a coalition of U.S. auto industry groups urged Trump not to impose 25% tariffs on imported auto parts, warning they would cut vehicle sales and raise prices.
Trump had said earlier that he planned to impose tariffs of 25% on auto parts by May 3.
"Tariffs on auto parts will scramble the global automotive supply chain and set off a domino effect that will lead to higher auto prices for consumers, lower sales at dealerships and will make servicing and repairing vehicles both more expensive and less predictable," the industry groups said in the letter.
The letter from the groups representing GM, Toyota Motor, Volkswagen, Hyundai and others was sent to U.S. Trade Representative Jamieson Greer, Treasury Secretary Scott Bessent, and Commerce's Lutnick.
"Most auto suppliers are not capitalized for an abrupt tariff-induced disruption. Many are already in distress and will face production stoppages, layoffs and bankruptcy," the letter added, noting "it only takes the failure of one supplier to lead to a shutdown of an automaker's production line."
While uncertainty rules on trading floors, most Asian markets pushed higher on Tuesday, with Hong Kong, Sydney, Singapore, Taipei, Mumbai and Manila in positive territory.
Seoul also rose as automakers Hyundai and Kia were boosted by the news of the auto tariff.
London, Paris and Frankfurt opened with gains.
Shanghai dipped and Tokyo was closed for a holiday.
Data this week could give an idea about the impact of Trump's measures on companies, with tech titans Amazon, Apple, Meta and Microsoft all reporting their earnings.
Also on the agenda are key economic data, including job creation and the Federal Reserve's (Fed) preferred gauge of inflation amid warnings that the tariffs could reignite price increases.
"While consumer and business survey data continue to plunge, the hard data has shown resilience, a trend likely to persist for a month or two until the effects of the Liberation tariffs become evident mid-year," said Tony Sycamore, a market analyst at IG.
"If President Trump's tariffs are reduced, weaker hard data will be looked through, allowing the U.S. economy and stock markets to muddle through the end of the year."
However, he added that if tariffs stayed elevated, stock markets could resume their losses, and the chances of a recession rose.
