(Bloomberg) — US automakers are making a last-ditch effort to sway the Trump administration on tariffs set to take effect this week, contending that levies on the thousands of parts they source abroad could have catastrophic effects on the industry.
Ford Motor Co. (F), General Motors Co. (GM) and Chrysler parent Stellantis (STLA, STLAM.MI) are lobbying the administration to exclude certain low-cost car components from the planned tariffs, according to people familiar with the matter. Executives have met with the White House, the Commerce Department and the office of the US Trade Representative to discuss the exclusion, said the people, who asked not to be identified revealing internal discussions.
President Donald Trump’s levies, aimed at bolstering the American auto industry, stand to have ripple effects for the US carmakers that have increasingly turned to low-cost countries for the many parts that make up a modern automobile. The administration plans to tax auto components on top of the planned 25% tariffs on fully built vehicles, which are set to start April 3.
Detroit’s automakers have conceded that they’re willing to pay tariffs on completed cars and large components like engines and transmissions, the people familiar with the matter said. But representatives for the companies have told the administration that levies on parts would drive up costs by billions of dollars, leading to layoffs and profit warnings that would run counter to Trump’s goal of building up the industry, one of the people said.
Representatives for the companies declined to comment. Trump on Monday declined to say whether the administration is considering exempting some car parts from the tariffs. He said he had already given automakers “a break” by pushing off tariffs for a month.
The US companies are seeking exemptions on low-value parts like sheaths of electrical wiring that course through modern cars, which are labor intensive to produce and tend to be made in Mexico and other low-wage countries. They argue that the combined levies would send car prices soaring and depress demand from American consumers, who are already confronting average prices approaching $50,000.
The semiconductor shortage that roiled the auto industry just after the pandemic exposed the fragility of the global ecosystem for vehicle parts, said Jessica Caldwell, head of insights for automotive researcher Edmunds.com.
“Automakers are understandably concerned that tariffs on all parts could trigger similar issues,” Caldwell said. “Considering the vast number of parts in a vehicle, such disruptions seem almost inevitable. Increased pressure on these smaller suppliers could lead to business failures, potentially causing significant chaos in vehicle production.”
In the last few weeks, many automakers stockpiled cars in the US to avoid the tariff impact and car buyers flocked to dealerships to make purchases before the levies took effect. Speaking about the tariffs over the weekend, Trump told told NBC News that he “couldn’t care less if they raise prices because people are going to start buying American cars.”
Top Executives
As the tariff deadline approaches, the automakers have sent their top brass to Washington in recent days to lobby directly with the administration, according to the people familiar with the matter.
Trump on Monday said he met with Stellantis Chairman John Elkann. Ford Executive Chair Bill Ford, great-grandson of founder Henry Ford, met last week with Commerce Secretary Howard Lutnick. GM Chief Executive Officer Mary Barra, Chief Financial Officer Paul Jacobson and other executives have been meeting with administration officials since the president announced the tariffs, people familiar said.
While Trump’s executive order calls for the 25% tariffs on fully built cars to start on April 3, the levies on major parts such as engines, transmissions and electrical systems would begin May 3. The president also is planning to announce reciprocal tariffs on multiple countries on April 2. It’s unclear whether those milestones represent deadlines for when a deal must be reached on auto parts.
The automakers sense there is an opening to get tariff relief on parts because that section of Trump’s executive order came together late, as the document was being drafted on March 26, one of the people said.
Since then, executives and their lobbyists have been working to educate the administration on the economics of the complex global web of auto parts production.
For example, low-cost commodity parts, like video screens, are made almost exclusively overseas where wages are lower. If all auto parts made abroad were subject to import levies, there would be few, if any, tariff-free cars for sale in the US market, the person said.
To try to win over Trump, the auto representatives have emphasized that they support his goals to build more automobiles in the US and to expand America’s manufacturing base. They’ve pledged to make plans to do so, but they’re aiming to get the break on parts first.
—With assistance from Josh Wingrove, Gabrielle Coppola and Jennifer A. Dlouhy.
