Trump eases auto tariffs burden as Lutnick touts one done foreign trade deal

Washington/ Detroit: US President Donald Trump signed an order 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 US auto industry and just days before a fresh set of 25 per cent import taxes was set to kick in on automotive components. The trip, on the eve of his 100th day in office, comes as Americans take an increasingly dim view of Trump's economic stewardship, with indications his tariffs will weigh on growth and could drive up inflation and unemployment.

In his latest partial reversal of tariff policies, the Republican president agreed to provide carmakers with credits for up to 15 per cent of the value of vehicles assembled domestically. 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 per cent 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 US, Canada and Mexico.

It offers the industry a "little relief" as companies invest in more US production, Trump said as he left Washington for Michigan. "We just wanted to help them ... if they can't get parts, we didn't want to penalize them."

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, US 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 US The benchmark S&P 500 Index closed 0.6 per cent higher 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 US 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. A Reuters/Ipsos poll published Tuesday showed just 36 per cent of respondents approve of his economic stewardship, the lowest level in his current term or in his 2017-2021 presidency.

Meanwhile, the first quarterly report on US 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 per cent annualized rate from January through March, according to a Reuters poll of economists, down from 2.4 per cent 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."