The Trump administration is granting automakers a one-month exemption from tariffs against Canada and Mexico, White House press secretary Karoline Leavitt announced Wednesday.
“We spoke with the big three auto dealers. We are going to give a one-month exemption on any autos coming through [the United States-Mexico-Canada Agreement] USMCA,” Leavitt said, reading off a statement from President Trump.
“Reciprocal tariffs will still go into effect on April 2, but at the request of the companies associated with USMCA, the president is giving them an exemption for one month, so they are not at an economic disadvantage,” she further explained.
The carveout was granted to Ford Motor Co., General Motors Co. and Stellantis NV, following a meeting between Trump and executives of the automakers.
At 12:00 a.m. Tuesday, the Trump administration implemented 25% across-the-board tariffs on Canada and Mexico after their failure to heed the president’s ultimatum demanding greater crackdowns on fentanyl smuggling.
Canadian energy is subject to a lower tariff rate of 10%.
Both countries are eyeing retaliatory tariffs in response, as is China, which was hit with a 20% tariff.
Unlike Canada and Mexico, China is not part of the USMCA, the trade agreement Trump renegotiated during his first term that replaced the North American Free Trade Agreement (NAFTA). Therefore, it is not subject to the auto exemption.
Mexico plans to announce their retaliatory plans against the US by Sunday, while Canada is targeting $100 billion worth of American goods, and China has implemented a 15% tariff on a slew of American farm products as well as increased the number of American companies facing export controls.
Trump also revealed Wednesday that he spoke with Canadian Prime Minister Justin Trudeau amid the tense economic standoff with America’s northern neighbor.
“For anyone who is interested, I also told Governor Justin Trudeau of Canada that he largely caused the problems we have with them because of his Weak Border Policies, which allowed tremendous amounts of Fentanyl, and Illegal Aliens, to pour into the United States,” Trump revealed on Truth Social, using his preferred nickname for the PM.
“These Policies are responsible for the death of many people!”
Trump claimed that Trudeau, who is expected to step down at the end of the month ahead of an internal Liberal Party leadership election, called him about the tariff situation and said the call ended in a “‘somewhat’ friendly matter” after a back-and-forth over fentayl.
“I told him that many people have died from Fentanyl that came through the Borders of Canada and Mexico, and nothing has convinced me that it has stopped. He said that it’s gotten better, but I said, ‘That’s not good enough,’” Trump recounted of their conversation, adding that the outgoing PM “was unable to tell me when the Canadian Election is taking place, which made me curious, like, what’s going on here? I then realized he is trying to use this issue to stay in power.”
In fact, no date has yet been set for the Canadian federal election, which by law must be held on or before Oct. 20.
Last November, shortly after winning the presidency, Trump threatened to slap 25% across-the-board tariffs against Canada and Mexico if the two neighbors failed to take more aggressive actions to curb the flow of fentanyl and illegal immigrants into the US.
After shifting the deadline several times, those tariffs had been slated to go into effect last month, but Trump hit pause at the 11th hour after announcing a deal for an extension, touting steps Mexico and Canada were taking to pacify his demands.
By the start of March, it became clear that Trump was dissatisfied with the progress being made, and his administration made good on its threat.
These tariffs are far more consequential than the ones Trump imposed during his first administration in terms of their economic impact.
Automakers are mulling through strategic adjustments, such as relocating production from Mexico to the US, to mitigate tariff effects.
The news of a delay in tariffs sparked an immediate reaction in the stock market, with Stellantis shares surging as much as 8.1% in midday trading in New York.
GM’s stock climbed by as much as 6%, while Ford saw a 4.5% increase.
The major US automakers, particularly those based in Detroit, have been lobbying aggressively to suspend or modify the tariffs, citing the potentially dire consequences for the industry.
Trump’s sweeping tariffs impact the three largest trading partners of the US, totaling at least $1.5 trillion in annual imports.
Commerce Secretary Howard Lutnick has hinted at possible exemptions but was short on specifics.
Speaking to Bloomberg Television on Tuesday, Lutnick suggested that changes could be announced as early as Wednesday, though he did not elaborate on details.
Some sources indicated that any delay in the tariffs would allow automakers more time to develop plans for increasing investment and production within the US—a key demand from Trump.
The temporary delay would set up another crucial decision in the coming weeks.
Trump has signaled plans to introduce a fresh round of tariffs in early April, including specific levies targeting farm-related products.
The 47th president is specifically keen on enacting “reciprocal” tariffs that match fines, subsidies and tariffs imposed by other countries on US products and services.
Those reciprocal tariffs could have a dramatic impact on US trade and escalate a budding trade war with other countries.
Industry leaders had urged the administration to exempt vehicles manufactured in North America that comply with parts-sourcing requirements under the USMCA.
Among the executives sounding the alarm is Ford CEO Jim Farley, who has been particularly outspoken in his criticism of the duties.
Last month, Farley described the policy as “devastating” for US automakers and warned it would “blow a hole” in the industry’s financial stability.
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