U.S. President Donald Trump has granted automakers in Mexico and Canada a one-month exemption from 25% tariffs following negotiations with major industry leaders. The decision, confirmed by White House Press Secretary Karoline Leavitt on Wednesday, comes as part of efforts to ease the economic burden on automakers while encouraging domestic production.
"We spoke with the Big Three auto manufacturers. We are going to give a one-month exemption on any autos coming through the United States-Mexico-Canada Agreement (USMCA)," Leavitt stated. She added that reciprocal tariffs, set to take effect on April 2, will still be implemented, but the exemption provides temporary relief to companies associated with USMCA to avoid economic disadvantages.
The announcement follows the imposition of a 25% tariff on all imported goods from Mexico and Canada, which took effect on Tuesday, alongside an additional 10% levy on Chinese imports. Last month, Trump also announced plans to impose 25% tariffs on automobile, pharmaceutical, and semiconductor imports starting April 2. Additionally, he signed an executive order to investigate trade relations, with reciprocal tariffs expected to take effect as early as April 1.
The USMCA, which replaced NAFTA in July 2020, mandates that 75% of a vehicle's parts be manufactured in North America to qualify for zero tariffs when traded between the three nations. The agreement is scheduled for review by July 2025.
Automakers Urged to Shift Production to the U.S.
White House officials met with executives from Stellantis, Ford, and General Motors on Wednesday to discuss the tariff exemption. According to Leavitt, Trump emphasized the need for automakers to invest in and relocate production to the United States.
“He told them they should get on it, start investing, start moving, shift production here to the United States of America, where they will pay no tariff. That’s the ultimate goal,” Leavitt said.
The announcement spurred a rally in automaker stocks. Ford Motor’s shares rose 3.65%, General Motors climbed 1.76%, and Stellantis gained 2.46%. European automakers also saw gains, with Mercedes-Benz up 3.08%, Volkswagen rising 3.38%, and BMW increasing 4.3%.
Potential for Further Exemptions
A White House spokesperson indicated that Trump may consider additional tariff exemptions after pausing the automaker duties. The President is reportedly weighing exemptions for certain agricultural products affected by tariffs on Canada and Mexico.
However, Trump expressed dissatisfaction with Canada’s efforts to curb fentanyl trafficking in a post on Truth Social. Despite this, he described his recent call with Canadian officials as ending "in a somewhat friendly manner."
The temporary exemption provides automakers with a window to adjust their operations, while the broader tariff strategy underscores the administration’s focus on reshoring manufacturing and addressing trade imbalances.