The Trump administration plans to delay auto tariffs by up to six months, stopping itself for now from widening global trade disputes, four sources told CNBC.
The White House faces a Saturday deadline to decide whether to slap duties on car and auto part imports over national security concerns. After Saturday, the administration would have another 180 days to come to a decision as long as it is negotiating with its counterparts.
President Donald Trump sees the tariffs as a way to gain leverage over trading partners such as the European Union and Japan during ongoing talks. But the president risks sparking fresh global trade clashes if he goes through with car duties. The European Union, for example, has already prepared a list of retaliatory duties to implement if Trump targets autos.
Stocks gained back their their losses Wednesday following news of the administration's plans, which were confirmed by a source briefed on the talks, an administration official and two foreign officials. Shares of automakers such as Ford and General Motors jumped.
The delay comes as the White House tries to strike a potential trade deal with China to end an escalating conflict. The world's two largest economies increased tariffs on one another in recent days, amplifying a fight that has rattled financial markets and threatened to drag on the global economy.
Trump is mulling whether to use a national security justification to slap tariffs as high as 25% on cars. In February, the Commerce Department delivered a report to the president saying that he could justify duties citing a national security threat. He also used the rationale to put tariffs on steel and aluminum imports.
Lawmakers from both major parties have pushed Trump not to move forward with the auto duties. Republicans and Democrats on Capitol Hill have previously criticized the national security grounds used to imposing duties on goods from allies such as Canada.
U.S. automakers have also opposed the potential tariffs. When the Commerce Department gave Trump its report in February, the industry group Alliance of Automobile Manufacturers said "imposing tariffs on imported vehicles and parts would be a mistake, with significant negative consequences" for the auto industry and its employees.