5 March: President Donald Trump has approved a temporary one-month exemption on auto tariffs for vehicles imported from Canada and Mexico, White House Press Secretary Karoline Leavitt confirmed on Wednesday.
“We spoke with the Big Three auto manufacturers—Stellantis, Ford, and General Motors—who requested this exemption. The president has agreed to provide a one-month waiver on autos entering the U.S. under USMCA,” Leavitt stated during a White House briefing.
However, she emphasized that reciprocal tariffs will be implemented on April 2, warning that businesses should use this time to align with Trump’s broader trade agenda.
“The president told them to start investing, shifting production back to the U.S., where they will pay no tariffs. That is the ultimate goal,” Leavitt added.
Canada Rejects Tariff Compromise
Despite the brief reprieve, Canadian leaders remain firm in their opposition to any tariffs on their goods. Ontario Premier Doug Ford reiterated this stance, saying, “We are on the same page with Prime Minister Trudeau—zero tariffs, and we will not budge.”
The exemption announcement follows Trump’s upcoming plans for global reciprocal tariffs, set to be unveiled on April 2. Leavitt confirmed that, unlike the auto tariffs, there will be no exemptions for these new trade measures.
Additionally, tariffs of 25% on various Canadian and Mexican goods remain in place. U.S. Commerce Secretary Howard Lutnick previously highlighted Canada’s 5% national sales tax as a factor when discussing potential reciprocal tariffs.
The Vital Role of Canada and Mexico in the Auto Industry
The North American auto sector has been deeply interconnected for decades due to trade agreements, allowing for the seamless movement of vehicles and parts across borders.
U.S. automakers warn that tariffs on Canadian and Mexican auto imports would significantly increase costs for North American-built cars, while giving an advantage to European and Asian manufacturers with minimal reliance on parts from the region.
“This would be a massive windfall for Japanese, South Korean, and European automakers, who import up to two million vehicles into the U.S. without facing these tariffs,” said Ford CEO Jim Farley.
Economic Impact of Auto Tariffs
Last year, Canada’s auto industry produced 1.3 million vehicles, while Mexico manufactured 4 million vehicles, with around 70% of these cars being sold in the U.S. Meanwhile, the U.S. produced 10.2 million vehicles domestically.
According to Commerce Department data, the U.S. imported $217 billion worth of passenger vehicles in 2024. Mexico was the largest source, followed by Japan, South Korea, Canada, and Germany. Passenger cars were Canada’s second-largest export to the U.S., valued at $28 billion, just behind crude oil.
Additionally, Canada and Mexico exported $47 billion worth of auto parts to the U.S. last year.
If the exemption expires and the 25% tariff is imposed, the cost of manufacturing vehicles in North America could rise by $3,500 to $12,000 per vehicle, according to Anderson Research Group, a Michigan-based economic think tank.
Businesses Left in Trade Limbo
The administration’s shifting trade policies have left many businesses uncertain about the future. A survey by the Institute for Supply Management revealed that several companies are increasingly concerned about the impact of tariffs on their operations.
“There is significant uncertainty about future business activity due to tariff risks and other government actions,” the report noted.
Despite this volatility, the stock market reacted positively to the temporary tariff exemption. On Wednesday, the Dow surged by 540 points, while the S&P 500 rose by 1.2% and the Nasdaq climbed 1.49%. Auto stocks saw gains as well, with Ford up 5.7%, Stellantis up 9.3%, and GM rising 7.7%.
Looking Ahead
With the one-month exemption in place, automakers and policymakers face an urgent deadline to address trade concerns before April 2, when reciprocal tariffs are set to take effect. Whether further negotiations or industry pressure will lead to additional exemptions remains uncertain.
