Trump to propose making interest on car loans tax deductible

By Nora Eckert and David Shepardson

DETROIT/WASHINGTON (Reuters) -Republican presidential candidate Donald Trump on Thursday will propose making all interest on car loans fully tax-deductible and taking steps to prevent Chinese automakers from selling vehicles in the United States, according to excerpts of a speech seen by Reuters ahead of remarks in Detroit.

Trump will say at the Detroit Economic Club he plans to impose new tariffs to prevent Chinese automakers from building cars in Mexico and exporting them to the United States, part of an effort to appeal to autoworkers in the battleground state of Michigan.

Trump also will say he will formally notify Mexico and Canada of his intent to renegotiate a North American free trade deal to address concerns about Chinese vehicles, according to the prepared remarks. Vice President Kamala Harris has also said she plans to invoke the renegotiation provision if elected.

Critics say the free trade deal approved during Trump’s term allowed the Detroit Three automakers to continue to produce hundreds of thousands of vehicles in Mexico and export them to U.S. buyers.

Trump on Sunday said he would slap tariffs as high as 200% on vehicles imported from Mexico.

The vehicle interest proposal – which would treat interest paid on vehicle loans like home mortgages on federal tax returns – is the latest in a long string of potential tax cuts the former U.S. president has floated during the final weeks of his campaign against Harris.

Polls show the two are locked in a tight race ahead of the Nov. 5 election, with the outcome expected to be decided by slim margins in battleground states like Michigan.

Congress in 1986 repealed the federal deduction for interest paid on auto and other consumer loans as part of a tax reform bill. In September, buyers paid an average interest rate of 7.1% on new cars and 11.2% on used cars, according to car research company Edmunds.

Trump will say the tax cut “will stimulate massive domestic auto production, and make car ownership dramatically more affordable for millions of working American families.”

President Joe Biden last month proposed prohibiting key Chinese software and hardware in vehicles with internet connectivity on American roads due to national security concerns, a move that would effectively bar Chinese cars and trucks from the U.S. market. Biden separately announced new 100% tariffs on all Chinese EVs effective Sept. 27 — on top of a 25% import tariff on all Chinese vehicles that Trump imposed.

Trump will also say he will bar all autonomous vehicles made by Chinese companies from traveling on U.S. roads.

Biden last month also proposed barring Chinese automakers from testing autonomous vehicles on U.S. roads.

If elected, he will need congressional support to pass changes of tax laws.