U.S. President Donald Trump signed a new executive order and accompanying proclamation on Tuesday aimed at easing the impact of auto tariffs on domestic car manufacturers. By ILM.

While the existing 25% tariff on imported cars remains in place, and a new 25% levy on imported auto parts is still scheduled to take effect this weekend, the administration unveiled key exemptions designed to blunt the financial blow to U.S. automakers.

The changes allow domestic car producers to receive limited reimbursements for imported parts used in U.S.-manufactured vehicles. These reimbursements will initially be capped at 3.75% of the vehicle’s value, dropping to 2.5% in the second year and ending entirely thereafter.

The policy also prevents tariffs from stacking or overlapping for automakers. Instead, they will only be required to pay the highest applicable tariff, avoiding separate duties on both finished parts and raw materials like steel or aluminium.

Speaking at a rally in Michigan celebrating the first 100 days of his second term, Trump said: “They took in parts from all over the world. I don’t want that. I want them to make their parts here. We gave them a little time before we slaughter them if they don’t do this.”

Cars with at least 85% of their parts either produced in the U.S. or compliant with the United States-Mexico-Canada Agreement (USMCA) will be exempt from all tariffs, under the new policy.

Auto manufacturers and industry groups have spent months urging the White House to ease tariffs, warning of widespread disruptions to the global supply chain. In a recent letter, a coalition of U.S. and foreign automakers cautioned that the tariffs would raise prices for consumers and complicate repairs and service nationwide.

Major OEMs such as General Motors, Ford and Stellantis have issued statements thanking President Trump for the move and noting their appreciation for his support of the automotive industry.

Despite this, major automotive companies continue to drop their forecasts for upcoming quarters and report poorer result