The one-month exemption is for cars and trucks that comply with USMCA content rules.
President Donald Trump exempts automakers from punishing 25% tariffs in Canada and Mexico for a month, as long as they comply with the terms of the existing free trade agreement, the White House said.
Wednesday’s announcement comes after Trump spoke with the chief executives of three major automakers, Ford, GM and Stellantis.
Auto stocks rose in the news, with General Motors rising 5.3% and 4.1%.
Trump’s news chief said Wednesday that the president had heard about the additional exemptions, but Canadian Prime Minister Justin Trudeau reported that the Associated Press had not intending to lift Canada’s retaliation fees if Trump leaves tariffs on Canada.
Trump’s tariffs pose extreme challenges for automakers who produce vehicles in all three countries and often ship multiple times when they accumulate in systems or completed vehicles across North American borders.
Ontario Premier Doug Ford previously told The Associated Press that it will begin closing assembly lines in the US and Ontario when the U.S. and Canadian automotive sectors last for about 10 days.
“People are going to lose their jobs,” he said.
As outlined by Trump, a one-month car and truck exemption that complies with the US-Mexico-Canada contract’s complex content rules will benefit Ford, GM and Stellantis.
It also requires 40% of the content of passenger cars manufactured in the US or Canada based on a list of “core parts” including engines, transmissions, body panels and chassis components. The threshold for pickup trucks is 45%.
The automaker has expressed support for increasing U.S. investment, but they want certainty about tariff policies and vehicle emission rules before making any dramatic changes, two industry sources told Reuters.
Trump also could eliminate 10% tariffs on Canadian energy imports, including crude oil and gasoline that comply with the USMCA rules of origin, Reuters reported citing sources familiar with the discussion.
Trade tensions
Tariffs could trigger a recession, threatening to derail Canada’s fledgling economic recovery. This is because the country sends 75% of its exports to the US, and from there it earns a third of all imports.
Trade tensions could already be hurting the US. New data released Wednesday showed slower payroll growth and lower wage growth for workers switching jobs, indicating that uncertainty about Trump’s policies is likely. The dollar hit its three-month low on Wednesday, with the US stock index steadily falling this week. NASDAQ has fallen 9% since February 20th.
Trump also imposed an additional 10% obligation on Chinese products.
The exemption would also benefit large foreign branded automakers whose production footprints in the US, including Honda and Toyota, but some competitors who do not follow will have to pay 25% US tariffs.
On April 2nd, Trump is set to announce what he calls “mutual” tariffs, to match tariffs, taxes and subsidies provided by other countries. It could dramatically increase the tariff rates charged worldwide, while maintaining the risk of more tariffs.
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