US President Donald Trump is exempting automakers from newly imposed tariffs on Mexico and Canada for one month, the White House said.
The temporary reprieve follows representations from industry leaders who warned of the negative impact of tariffs on their costs and supply chains. The US tariffs of 25% on goods imported from Canada and Mexico came into effect earlier this week.
Go deeper with GlobalData
Reports have suggested that in addition to supply chain turmoil for US automotive companies, the tariffs would force the prices of vehicles up in the US by thousands of dollars.
“We are going to give a one-month exemption on any autos coming through USMCA,” White House Press Secretary Karoline Leavitt said, referring to the trade deal Trump negotiated with Canada and Mexico in his first term. “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.”
The exemption also applies to auto parts that comply with the trade pact, a White House official said, according to Bloomberg. The news agency said administration officials had met Tuesday to discuss the matter with the heads of Ford, General Motors and Stellantis. It also said President Trump spoke with Ford’s chair Bill Ford, Ford CEO Jim Farley, GM CEO Mary Barra and Stellantis Chairman John Elkann.
Last month, Ford CEO Jim Farley told a group of US lawmakers that 25% tariffs on Mexico and Canada would ‘blow a hole’ in the US auto industry.
In recent weeks, US car companies have pushed for tariff exemptions for vehicles made in North America that adhere to parts-sourcing rules under USMCA. Under the terms of the USMCA trade deal (negotiated during Donald Trump’s first Presidential term as successor to the NAFTA) vehicles that have 75% North American content get duty-free access to the US market.
North America’s automotive manufacturing sector is – and has been for decades – heavily integrated regionally with complex supply chains for component systems that cross borders multiple times. However, the Trump administration will be pushing for automakers to commit to shifting more production from Mexico and Canada into the US.
The issue of trade rules in North America will likely continue to simmer until the White House’s temporary exemption for the automotive sector expires in early April. That is when the US is also scheduled to implement a new round of ‘reciprocal’ tariffs that will hit imports to the US from around the world.
