Though it seems like a lifetime ago, it’s been just three weeks since April 2 — a date henceforth known as “Liberation Day” by presidential decree. On that day President Donald Trump laid out his strategy for the international trade war he had dreamed of for decades.
It represented the largest tariff hike since the Smoot-Hawley Tariff Act in 1930, with minimum 10% tariffs across the board (including for countries with which we have trade surpluses and even countries without any human inhabitants), and supposedly “reciprocal” tariffs for our largest trading partners.
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The effect on the stock market has been undeniable, with the Dow Jones Industrial Average suffering four 1,000-point-loss days since Liberation Day. The Dow had previously suffered such a loss only seven times in its 130-year history.
While market swings this wide are outside the norm, market turbulence is generally not. Trump’s trade war has riled markets in the past, including during his first term as President from 2017 to 2020.
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But this time around, the U.S. dollar and bond markets are also being harmed. The dollar fell over 4.5% in April, setting the world’s reserve currency up for its biggest decline since 2022.
The International Monetary Fund slashed its global economic growth forecast to 2.8% from 3.3% this week.
With all of this bad economic news piling up, and with President Trump’s approval ratings tanking even before the effects of the trade war are felt on U.S. shores, the president is making a change that the auto industry will love.
Trump gives the auto industry another carveout
After meeting with industry lobbyists over the past few weeks, President Trump is planning to exempt car parts from the 145% tariffs the U.S. currently has on China, the Financial Times reported.
The exemption would keep the 25% tariffs on all foreign-made cars and the separate 25% tariff on car parts that go into effect on May 3, however.
Trump has always stated that he was willing to adjust his tariff policies, using his intuition to recognize which industries deserve additional help.
Earlier this month, the president announced that consumer electronics like laptops and smartphones would be exempted from the tariffs, even though that type of hardware makes up about 22% of China’s imports to the U.S.
Despite electronics and auto parts being a sharp pain point for China, Trump has softened his position after heavy lobbying from both industries.
Trump’s inauguration fund raised a record $250 million, with more more than $150 million of that coming from companies, individuals, and trusts that paid out at least $1 million, according to Federal Election Commission data.
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The auto industry braces for the worst
The messaging around the administration’s auto tariffs has been mixed, to say the least.
Last month, President Trump gathered the CEOs of some of the country’s top automakers on a call, warning them not to raise car prices in response to tariffs that were going into effect, the Wall Street Journal reported, citing multiple people with direct knowledge of the call.
The president instead insisted that his 25% tariff on all imported vehicles, and presumably the subsequent retaliatory tariffs placed on American exports in response, were a good thing and that the White House would look unfavorably on carmakers that raised prices.
While 50% of auto part imports comply with the United States-Mexico-Canada (USMCA) agreement that excludes them from tariffs, the other 50% of parts are spread out in cars that could otherwise be duty-free.
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“There’s not a lot of clarity around which tariffs are stacked on top of each other,” Ryan Mandel, auto physical damage solutions claims performance director for collision repair company Mitchell International, told Repair Driven News.
While car parts like sheet metal, outer closure components, and components for parts like the hood, fender, quarter panels, doors, and bumper do not fall under the new tariffs, according to Mandel, other parts like the copper, ceramics, glass, and plastics sourced globally in the advanced driver-assistance systems do.
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