Trump Freezes Auto Tariffs for One Month, Fueling Trade Uncertainty

President Donald Trump has given a one-month break on auto tariffs for Mexico and Canada, White House Press Secretary Karoline Leavitt said Wednesday, making a big, temporary shift on an important part of his administration’s economic strategy.

After talking with Ford, General Motors, and Stellantis, Trump said he approved the delay to help prevent financial trouble for America’s Big Three automakers. But the tariffs aren’t gone – not yet.

Temporary Tariff Relief

“At the request of the companies involved with USMCA, the president is giving them a break for one month so they don’t face an economic disadvantage,” Leavitt said during the daily press briefing. (USMCA is the free-trade agreement signed during Trump’s first term between the US, Mexico, and Canada.)

The rest of the 25% tariffs on Mexico and Canada are still in place. Leavitt also said Trump would be open to considering other tariff breaks – just days after saying there would be no more. Stocks jumped on the news Wednesday.

Leavitt mentioned that automakers should use the one-month break to focus on Trump’s goal of bringing car production back to the US – a big task, since that would need huge investments, hiring, and careful planning.

“He told them to get started, start investing, start moving, bring production back to the United States, where they’ll pay no tariff. That’s the ultimate goal,” she added.

Ford Responds

In response, Ford said it would keep talking with the administration about the challenges the industry faces.

“We appreciate President Trump’s efforts to support our industry and exempt auto companies following USMCA,” Ford said in a statement. “We’ll continue having honest conversations with the Administration to help create a bright future for our industry and US manufacturing.”

Canada Reacts

But Canada isn’t exactly cheering for the one-month break, even though US Commerce Department data shows cars are Canada’s second-biggest export to the US.

Ontario Premier Doug Ford said he and Canadian Prime Minister Justin Trudeau won’t accept any tariffs on their country’s goods. “We’re on the same page, zero tariffs, and we’re not backing down,” he told reporters in a briefing Wednesday.

Tariffs and the Global Trade Scene

Trump’s decision to grant the extension comes just before his plan for global reciprocal tariffs, which will be revealed on April 2. Unlike the tariffs on Mexican and Canadian goods, Trump won’t consider exemptions for the upcoming reciprocal tariffs, Leavitt told reporters.

These tariffs could be added on top of the 25% tariffs still placed on other Canadian and Mexican goods. For example, last week on a Fox News interview, US Commerce Secretary Howard Lutnick criticized Canada’s 5% national sales tax when discussing possible reciprocal tariffs Trump might focus on.

The Importance of Mexico and Canada in the Auto Supply Chain

The days of 100% made-in-America cars are long gone. For years, the North American car industry has worked almost without borders, thanks to trade agreements signed by various presidents, including Trump.

As a result, parts and entire cars have crossed borders freely, sometimes more than once, before making it to US dealerships.

US automakers argue that tariffs on auto parts and cars coming from Canada and Mexico put US-made cars at a huge disadvantage. Even cars made in US plants rely on parts from Mexico and Canada, so they would face thousands of dollars more in costs. But cars from plants in Europe and Asia with fewer Mexican or Canadian parts wouldn’t face those extra costs.

“It gives free rein to South Korean, Japanese, and European companies,” Ford CEO Jim Farley told investors at a conference last month. “They’re bringing 1.5 to 2 million cars into the US that won’t be hit with those Mexican and Canadian tariffs. It would be one of the biggest wins for those companies ever.”

US Imports and the Impact on the Economy

Canadian plants made 1.3 million cars last year, according to data from S&P Global Mobility, while Mexican plants produced 4 million cars. About 70% of those cars ended up in US dealerships.

Meanwhile, US plants made 10.2 million cars.

Last year, the United States imported $217 billion worth of passenger vehicles, according to Commerce Department data. More than a fifth of those cars came from Mexico, the top source of auto imports last year. After Mexico came Japan, South Korea, Canada, and Germany, which exported a total of $131 billion worth of passenger cars to the US last year.

Passenger cars were Mexico’s top export to the US last year, valued at $50 billion. Behind crude oil, passenger cars were Canada’s second-largest export to the US last year, worth $28 billion.

In addition, Canada and Mexico sent a combined $47 billion worth of car parts to the US last year, federal trade data shows.

Without the auto exemption, the 25% tariff on Mexican and Canadian imports could raise the cost of making cars across North America by between $3,500 and $12,000, according to analysis by Anderson Research Group, a Michigan-based think tank.

Uncertainty Among Businesses

The administration’s quick change on auto tariffs adds to the trade chaos that has unfolded since Trump took office. Leavitt mentioned that the president is “open to hearing about additional exemptions.”

That leaves many businesses in uncertainty.

A new survey from the Institute for Supply Management released Wednesday showed that respondents noted “great uncertainty about future business activity due to the risk of tariffs and other potential government actions.” Some others said “tariffs are going to have a ripple effect that could hurt our business badly.”

Stock Market Reactions

US stocks jumped Wednesday after the announcement, with the Dow rising 486 points, or 1.14%. The broader S&P 500 rose 1.12%, and the Nasdaq Composite rose 1.46%. Auto stocks also closed higher, with Ford (F) up 5.75%, Stellantis (STLA) up 9.24%, and GM (GM) up 7.22%.