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Home » Trump to Pause Auto Tariffs for Canada and Mexico for One Month

Trump to Pause Auto Tariffs for Canada and Mexico for One Month

March 5, 20257 Mins Read Business
Trump to Pause Auto Tariffs for Canada and Mexico for One Month
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President Trump said on Wednesday that he would pause tariffs on cars coming into the United States from Canada and Mexico for one month, after a 25 percent tariff that he placed on America’s closest trading partners a day earlier roiled stock markets and prompted stiff resistance from industry.

Karoline Leavitt, the White House press secretary, read a statement from Mr. Trump on Wednesday saying that White House had spoken with the three largest auto makers, and that a one-month exemption would be given to cars coming in through United States-Mexico-Canada Agreement.

“At the request of the companies associated with U.S.M.C.A., the president is giving them an exemption for one month so they are not at an economic disadvantage,” the statement said. The three automakers that Mr. Trump spoke with were General Motors, Ford Motor and Stellantis.

Asked why Mr. Trump granted only a one-month reprieve, Ms. Leavitt said the president expected the automakers to move production back to the United States. The message, she said, was to “get on it, start investing, start moving, shift production here to the United States of America where they will pay no tariffs.”

The reprieve was a demonstration of the haphazard approach Mr. Trump has taken to trade policy, with the president announcing, pausing and then proceeding with a policy that is deeply influential for the North American economy within a matter of weeks. The decision came after Mr. Trump hosted a conference call Tuesday with Mary T. Barra, the chief executive of General Motors; John Elkann, the chairman of Stellantis; William C. Ford, the chairman of Ford Motor; and Jim Farley, Ford’s chief executive, according to a person briefed on the call.

The executives told the president that putting tariffs on cars and parts from Canada and Mexico would effectively erase all of their companies’ profits by imposing billions of dollars of new costs on them, the person said. They asserted that cars built in those countries supported jobs in the United States at parts factories, dealers and other related businesses.

They said they had invested in factories across North America because they were assured by Nafta and the U.S.M.C.A., the trade agreement Mr. Trump negotiated with Canada and Mexico in his first term, that the continent would be a free-trade zone, the person said. Changing the rules of that zone abruptly would have devastating consequences.

Executives from the three companies said they would not object to tariffs being imposed on cars imported from outside North America, the person said. Aside from Canada and Mexico, the United States imports a large number of cars from Japan, South Korea and Germany.

It was unclear what the reprieve means for carmakers, such as BMW, that manufacture cars in Mexico but are not fully in compliance with the terms of the trade treaty. Currently BMW pays a 2.5 percent tariff to import vehicles from a factory in San Luis Potosí, Mexico. BMW also makes cars in Spartanburg, S.C., which is one of the German company’s largest factories.

Mr. Trump has said that the levies were aimed at getting Canada and Mexico to stop flows of drugs and migrants across the U.S. border. But after months of threats, he chose to put the tariffs into effect this week, even after Canada and Mexico pledged to devote more resources to policing the border and drug trade.

The leaders of Mexico and Canada have called on Mr. Trump to drop the tariffs, saying that they are unfair and unjustified.

But Mr. Trump declined to offer a broader reprieve to Canada, despite fresh overtures by Prime Minister Justin Trudeau. Mr. Trump wrote on social media that he had talked with Mr. Trudeau and was still not convinced that Canada had done enough to stop the flow of fentanyl over the border.

On Truth Social, Mr. Trump wrote that he had told Mr. Trudeau that “many people have died from Fentanyl that came through the Borders of Canada and Mexico, and nothing has convinced me that it has stopped.”

The president added: “He said that it’s gotten better, but I said, ‘That’s not good enough.’”

Data shows only a small amount of fentanyl comes into the United States through Canada, and Canadians have bristled at assertion that they are a significant source of drugs for the United States.

On Tuesday, Canada requested consultations with the United States at the World Trade Organization over the tariffs, saying that they violated the pledges the United States had made at the W.T.O.

Vice President JD Vance and Howard Lutnick, the commerce secretary, were on the call with Mr. Trump and Mr. Trudeau. The discussion lasted 50 minutes, a senior Canadian official said, adding that the president brought up access to the Canadian dairy market for U.S. producers.

Mr. Lutnick and Canada’s finance minister, Dominic LeBlanc, will continue the conversation throughout the day to find a de-escalatory compromise. Mr. Trudeau is not prepared to lift Canada’s retaliatory tariffs on U.S. goods, the official said, but is open to considering selective tariff reduction or removal if the United States decides to remove or lower tariffs on specific Canadian goods. The official spoke on condition of anonymity because they were not authorized to brief the press on the ongoing negotiations.

In a news conference Wednesday, President Claudia Sheinbaum of Mexico defiantly repeated several times, “we will not submit.”

Ms. Sheinbaum said she had a call with Mr. Trump scheduled for Thursday, but had no updates or information on Mr. Lutnick’s assertions about a change to the tariffs. She said that if tariffs remained in place, the Mexican government would announce retaliatory measures on Sunday, when it has also called a demonstration in Mexico City.

“Between us all, we have to defend our sovereignty,” she said.

Ms. Sheinbaum also said that, in response to the tariffs, her government was already conferring about new trade partnerships, including with Canada and Chile.

“We will look to have more agreements and partnerships with other countries,” she said.

Mr. Trump’s move to impose a 25 percent tariff on most products from Canada and all products from Mexico, as well as an additional 10 percent tariff on all imports from China, caused stock markets to plummet globally Tuesday, before shares for some industries recovered somewhat.

Shares of some automakers bounced back on Wednesday on hopes that Mr. Trump would scale back his tariffs on Canada and Mexico. General Motors, Ford Motor and Stellantis all rose. Most carmakers rely on factories and suppliers in those countries for cars and parts and cannot easily or quickly shift production to the United States.

A one-month reprieve will do little to resolve the industry’s longer-term exposure to Mr. Trump’s parade of tariffs. They include steel and aluminum tariffs that take effect on March 12 and “reciprocal” levies that Mr. Trump plans to impose on April 2.

But it may give automakers a chance to stockpile cars and parts made in Mexico and Canada and blunt the impact if tariffs go into effect later.

Kevin Roberts, director of economic and market intelligence at CarGurus, an online vehicle shopping site, said it was unrealistic to expect that car companies could move their factories to the United States in a month.

“The auto industry is so global and so highly interconnected, you’re not going to be able to shift a large amount of production in a month’s time,” Mr. Roberts said.

A 25 percent tariff would add almost $12,000 to the average price of a car coming from Canada, Mr. Roberts estimated, and $10,000 to the average price of a car imported from Mexico.

Annie Correal, Matina Stevis-Gridneff, Vikas Bajaj and Neal E. Boudette contributed reporting.

Automobiles Claudia Commerce Department Customs (Tariff) Donald J Ford Motor Co General Motors Howard W International Relations International Trade and World Market Justin Lutnick Politics and Government Protectionism (Trade) Sheinbaum Stellantis NV Trudeau Trump United States Politics and Government
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