WASHINGTON/DETROIT (Reuters) -U.S. President Donald Trump plans to soften the blow of his auto tariffs on Tuesday with a mix of credits and relief from other levies on materials, and his trade team touted its first deal with a foreign trading partner, developments that eased investor worries about Trump’s erratic trade policies.
The change comes the day Trump was headed to Michigan, cradle of the U.S. auto industry and just days before a fresh set of 25% import taxes was set to kick in on automotive components.
The Republican president agreed to provide carmakers with credits for up to 15% of the value of vehicles assembled domestically, a senior administration official said. These could be applied against the value of imported parts, allowing time to bring supply chains back home.
Auto industry leaders had lobbied the administration furiously during the weeks since Trump first unveiled his 25% tariffs on imported vehicles and auto parts. The levies, aimed at forcing automakers to reshore manufacturing domestically, had threatened to scramble a North American automotive production network integrated across the U.S., Canada and Mexico.
The uncertainty unleashed across the auto sector by Trump’s tariffs remained on full display Tuesday when GM pulled its annual forecast even as it reported strong quarterly sales and profit. In an unusual move, the carmaker also opted to delay a scheduled conference call with analysts until later in the week, after the details of tariff changes were known.
Meanwhile, U.S. Commerce Secretary Howard Lutnick told CNBC he had reached one deal with a foreign power that should permanently ease the “reciprocal” tariffs Trump plans to impose. Lutnick declined to identify the country, saying the deal was pending local approvals.
“I have a deal done … but I need to wait for their prime minister and their parliament to give its approval,” Lutnick said.
Lutnick’s comments helped further lift stock prices that had been battered by Trump’s moves to reshape global trade and force goods makers to shift production to the U.S. The benchmark S&P 500 Index was on track for a sixth day of gains, its longest streak of gains since November.
WRONG ON EVERY PREDICTION
Trump and his team aim to strike 90 trade deals during a 90-day pause on his reciprocal tariffs announced earlier in April. His administration has repeatedly said it was negotiating bilateral trade deals with dozens of countries.
A chief Trump goal is to bring down a massive U.S. goods trade deficit, which shot to a record in March on a surge of imports aimed at front-running the levies.
Trump’s aggressive trade policies have cascaded through the global economy since his return to the White House in January, and the 90-day pause was announced after financial markets went into a tailspin over fears of recession and inflation, among other factors.
Softening the impact of auto levies is his administration’s latest move to show flexibility on tariffs which have sown turmoil in financial markets, created uncertainty for businesses and sparked fears of a sharp economic slowdown.
The first quarterly report on U.S. gross domestic product covering Trump’s term is due out on Wednesday. It is expected to reflect a large drag from the effect of his tariffs, mostly from a record surge in imports as companies and consumers front-loaded purchases of foreign goods to try to beat the new levies. The economy was forecast to have expanded at just a 0.3% annualized rate from January through March, according to a Reuters poll of economists, down from 2.4% in the final three months of 2024.
American and global companies are increasingly sounding the alarm about the tariffs’ effects.
UPS on Tuesday said it would cut 20,000 jobs to lower costs, while General Motors pulled its outlook and pushed its investor call to Thursday pending possible changes to trade policy. Also citing tariffs headwinds were American ketchup maker Kraft Heinz and Swedish appliances maker Electrolux , further evidence that a chaotic trade policy is taking a major toll on companies’ ability to plan beyond the immediate term.
About 40 companies worldwide have pulled or lowered their forward guidance in the first two weeks of first-quarter earnings season, a Reuters analysis showed.
“Every single prediction has been proved to be wrong,” Yannick Fierling, Electrolux CEO, told Reuters. “I’m surprised if people are claiming they have a view where tariffs are going.”
(Reporting by David Lawder in Washington and Ismail Shakil in Ottawa; Writing by Dan Burns; Editing by Doina Chiacu and David Gregorio)
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