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Donald Trump has handed carmakers a one-month reprieve on tariffs on imports from Mexico and Canada, in the latest last-minute policy shift to roil corporate America.
White House press secretary Karoline Leavitt said the president had spoken with Chrysler and Jeep maker Stellantis, Ford and General Motors on Wednesday.
Leavitt added the exemption would apply to cars complying with the terms of the 2020 trade deal between the US, Mexico and Canada.
“The president is giving them an exemption for one month so they are not at an economic disadvantage,” Leavitt said.
A senior Trump administration official later said that the exemption would also apply to car parts that were compliant with the USMCA agreement. Parts account for the bulk of North American cross-border trade in the industry.
The carve-out comes after markets reacted turbulently to the Trump administration’s imposition of 25 per cent tariffs on imports from Canada and Mexico, and an additional 10 per cent levy on China, on Tuesday.
At one point, all of the S&P 500’s post-election gains were wiped out, before the index regained ground. The index rallied strongly on Wednesday, adding 1.1 per cent in a broad rise.
Shares in US carmakers jumped, with Ford gaining 5.8 per cent, GM rising 7.2 per cent and Stellantis’s US-listed depositary receipts soaring 9.2 per cent. Other auto groups also gained, with Japan’s Honda and Nissan rising 2 per cent.
Previous modelling by Nomura analysts estimated that tariffs on vehicles imported to the US that do not comply with the USMCA would negatively impact the profits of Mazda, Subaru, Mitsubishi Motors and Hyundai the most.
Tariffs on Mexico and Canada had been seen as particularly punitive for the auto industry because of the complex supply chains that criss-cross North America.
Trump’s tariffs have triggered an escalating North American trade war. Canada responded with steep levies of its own on all US imports. Mexico has said it plans to announce its response on Sunday.
In a sign of the tensions raised by the incipient trade war, outgoing Prime Minister Justin Trudeau will not lift Canada’s retaliatory tariffs if Washington maintains any levies on Ottawa, a senior government adviser told the Financial Times.
Flavio Volpe, the head of Canada’s Automotive Parts Manufacturers’ Association, added that a month-long reprieve to the industry would not resolve the matter for businesses and workers fearful of job losses and plant closures.
He said: “No one can operate under 30-day threat cycles, including especially American businesses. Evidence of this is the fact that it was American businesses who requested this reprieve, not Canada or Mexico.”
The American Automotive Policy Council, a trade body representing Stellantis, Ford and GM in Washington, welcomed the move. GM separately said the new approach would enable US automakers to compete and invest domestically.
Toyota said that it is “prepared to make quick and optimal decisions once the situation becomes clearer”. Executives at the Japanese car producer have previously said it would attempt to cut costs before raising vehicle prices in response to tariffs.
An auto industry executive said that Toyota could increase production in the US and Canada to get more vehicles into the US ahead of the 30-day reprieve expiring, but warned of a “severe impact” if tariffs were applied to US imports from Mexico and Canada.
Leavitt suggested more industries would be able to make the case for carve-outs from the tariffs, saying Trump was “open to hearing about additional exemptions”.
“He always has open dialogue, and he’ll always do . . . what’s right, what he believes is right for the American people,” she added.
But Leavitt said Trump’s “reciprocal” tariffs would still go into effect on April 2 as planned.
“He feels strongly about that, no matter what, no exemption,” she said. “So that’s where the one month comes from.”
Trump had told companies “get on it” and begin shifting their production to the US, Leavitt said. “That’s the ultimate goal.”
Earlier on Wednesday, US commerce secretary Howard Lutnick said the president would “consider” relief for certain sectors.
But he reiterated the Trump administration’s complaints that Mexico and Canada had failed to clamp down on the trafficking of the deadly opioid fentanyl and suggested any reprieve could last just a month.
Additional reporting by Claire Bushey in Chicago
