In late April 2025, President Trump announced a sweeping 25% tariff on all imported cars and auto parts, sending shockwaves through Detroit and beyond. Automakers faced an abrupt deadline to reshuffle global supply chains or pay steep duties on everything from chassis components to infotainment screens. Reuters explains the surprise policy shift.
Just days later, the White House issued an executive order to soften the blow. It halted the “stacking” of multiple tariffs—so steel and aluminum duties wouldn’t compound the new auto taxes—and introduced credits worth up to 15% of a vehicle’s value to offset parts levies. Crucially, any car assembled in the U.S. with at least 85% domestic content would face zero tariffs. Carscoops breaks down the key “85% rule.”
Big Tesla win? Sec Lutnick says cars with 85% domestic content will face zero tariffs. https://twitter.com/Teslarati/status/1917305137623884073— Teslarati (@Teslarati) April 29, 2025
Commerce Secretary Howard Lutnick underscored the incentive: “Finish your cars in America and you win,” he said, pointing out that vehicles meeting the domestic‐content threshold would face no tariffs. That technicality effectively left Tesla—the only automaker meeting that standard—completely exempt. Reuters covers Lutnick’s comments.
Why only Tesla? Government data and the American University “Made in America Auto Index” confirm that Tesla’s Fremont and Texas factories produce Models 3 and Y variants with domestic‐content scores at or above 85%. No other mass‐market carmaker—foreign or domestic—can match that level, making Tesla the lone beneficiary of the exemption.
Only one car company would be exempt from tariffs under this 85% rule: Tesla. https://twitter.com/JoshSchwerin/status/1917312345678901234— Josh Schwerin (@JoshSchwerin) April 29, 2025
Legacy automakers immediately voiced frustration. GM, Ford and Stellantis warned they lack the time and supply‐chain flexibility to ramp up U.S. parts content quickly. Their CEOs cautioned that without similar exemptions or credits, increased costs would be passed on to consumers. Reuters reports the industry’s outcry.
Important to note that Tesla is NOT unscathed here. The tariff impact on Tesla is still significant. https://twitter.com/elonmusk/status/1635467890123456789— Elon Musk (@elonmusk) March 27, 2025
Wall Street wasted no time pricing in the advantage: Tesla’s stock jumped nearly 10% after the exemption was confirmed, recouping months of losses driven by trade‐war jitters. Analysts predict other automakers will lobby aggressively for carve‐outs or scramble to localize parts production—though few are likely to hit the 85% threshold by the 2028 deadline.
Looking ahead, automakers have until May 2028 to meet the domestic‐content standard before tariffs fully apply. For Tesla, the exemption cements a competitive edge; for everyone else, it raises the stakes in the race for “Made in America” manufacturing in the electric‐vehicle era.
