Trump Woos Auto Industry With Proposed Car Loan Tax Breaks

Republican presidential candidate Donald Trump on Thursday proposed making interest on car loans tax-deductible and implementing measures to block Chinese automakers from selling in the United States. This move aims to win over autoworkers as the election campaign enters its final weeks.

Speaking at the Economic Club in Detroit, home to the U.S. auto industry, Trump hit out at electric vehicles, the United Auto Workers union that represents auto workers, and even the city itself.

His plan would treat interest paid on vehicle loans similarly to home mortgage interest on federal tax returns, Reuters reported.

Trump said the tax break is designed to "stimulate massive domestic auto production and make car ownership dramatically more affordable for millions and millions of working American families."

This proposal adds to a series of tax incentives Trump has offered to appeal to key voter groups. Other promises include ending taxes on tip income, ending taxes on Social Security payments and reviving the SALT tax deduction.

The former president did not provide details on how he intends to implement these measures or their potential impact on the federal budget, according to the Associated Press.

The proposals would require congressional approval.

Trump also spoke about Detroit's economic challenges and took a dig at Harris, saying, "The whole country is going to be like, you want to know the truth, it'll be like Detroit. Our whole country will end up being like Detroit if [Harris] is your president."

In his speech, Trump also suggested imposing new tariffs on Chinese automakers building cars in Mexico and exporting them to the United States. He recently indicated he is prepared to impose 200% or even higher tariffs on vehicles. Trump also said that he will renegotiate a North American free trade deal with Mexico and Canada to address concerns about Chinese vehicles.

The free trade agreement was approved during Trump's presidency, allowing the Detroit Three automakers to continue producing hundreds of thousands of vehicles in Mexico for export to U.S. buyers. In 2023, Mexico exported over 2.5 million vehicles to the U.S.

In a video released Thursday, Trump offered to grant a key tax break to U.S. citizens living overseas to end so-called double taxation. Over the last several months, the former president has targeted key voter groups, including tipped and hourly workers, Social Security recipients, and car buyers, as well as Americans who live and vote abroad.

Analyses of Trump's tax cut proposals estimate they could cost between $6 trillion and $10 trillion over 10 years. Economists also warned his tariff plans could raise prices, cut economic growth by over 1% by 2026, and push inflation higher by 2%.

The offer to make car loan interest tax-deductible aims to help buyers grappling with rising car prices. Since 2021 inflation, the average price of a new car has jumped 18%, though the rate of increase has slowed compared to last year.

Federal Reserve interest rate hikes over the past several years, intended to control inflation, have pushed auto-loan rates higher. The average rate on a five-year car loan reached 8.4% in the third quarter of this year, compared to 4.5% two years ago when the Fed started increasing the rates.

The Fed has now started a rate-lowering cycle which should help bring those rates down.