Trump exempts some automakers from Canada, Mexico tariffs for one month

WASHINGTON/OTTAWA - US President Donald Trump will exempt automakers from his punishing 25 per cent tariffs on Canada and Mexico for one month, as long as they comply with an existing free trade agreement, the White House said on March 5.

The development brought a halt, at least for now, to Wall Street’s steepest skid in nearly three months.

Mr Trump is also open to hearing about other products that should be exempted from the tariffs, which took effect on March 4, the White House said.

He also made clear that he was not calling off

his trade war with Canada and Mexico

as he pressures the two countries to deter fentanyl smuggling.

After

a phone call with Canada’s Prime Minister Justin Trudeau,

Mr Trump said he was not convinced the situation had improved.

“He said that it’s gotten better, but I said, ‘That’s not good enough’,” Mr Trump wrote on his Truth Social platform. “The call ended in a ‘somewhat’ friendly manner!”

Public data shows that only 0.2 per cent of all fentanyl seized in the US comes from across the Canadian border, while the vast majority originates from across the southern border.

Canada is willing to reduce its retaliation to US tariffs if the Trump administration drops some of the tariffs it has imposed, a Canadian government source said.

Negotiations between Ottawa and Washington were continuing, and no deal had yet been reached, cautioned the source, who spoke on the condition of anonymity.

The one-month reprieve sparked a rebound in auto stocks, but trade tensions have created unexpected uncertainty for US corporations and sapped consumer confidence, leading to a sell-off in stocks in recent days.

General Motors shares were up 7.2 per cent and Ford gained 5.8 per cent on March 5, but both companies’ shares are still down on the year.

Mr Trump’s tariffs pose extreme difficulties for automakers, which produce vehicles in all three countries and often ship parts across North American borders multiple times as they get built up into systems and finished vehicles.

A one-month exemption for cars and trucks that comply with the US-Mexico-Canada Agreement’s (USMCA) complex content rules, as Mr Trump has outlined, would be a boon for Ford, GM and Stellantis.

He also might eliminate the 10 per cent tariff on Canadian energy imports, such as crude oil and petrol, which comply with USMCA’s rules of origin, a source familiar with the discussions said.

US Agriculture Secretary Brooke Rollins told Bloomberg that it was “to be determined” whether specific agricultural products such as potash and fertiliser might be carved out, saying “everything is on the table”.

Mr Trump’s tariffs threaten to severely damage relations between the three trading partners.

Canada has hit back with tariffs of its own on selected US imports, while Mexico has vowed to retaliate as well.

Mexican state-run oil company Pemex is in talks with potential buyers in Europe and Asia, including China, as it seeks alternative markets for its crude following Mr Trump’s tariffs, a senior Mexican government official said.

Nearly 60 per cent of Pemex’s exported barrels went to the US in 2024.

Boon for Detroit

Fentanyl is responsible for the majority of drug overdose deaths in the US, which have climbed above 100,000 annually in recent years.

Officials say Canada and Mexico are conduits for shipments of the drug and its precursor chemicals into the US in small packages that are often not inspected by customs agents.

The tariffs threaten to derail Canada’s fledgling economic recovery and could trigger a recession. The country relies on the US for 75 per cent of its exports and a third of all imports.

Canada could potentially use oil and gas exports as a lever in negotiations if US tariffs on Canadian imports escalate, Foreign Minister Melanie Joly told a Toronto business audience on March 5.

“There’s too much unpredictability and chaos coming out of the White House right now,” Ms Joly told reporters, adding that Canada could not “go through this psychodrama every 30 days”.

Trade tensions may already be hurting the US.

New data released on March 5 showed slowing payroll growth, as well as lower wage growth for workers who switch jobs, while a separate Federal Reserve report found widespread uncertainty among US businesses about Mr Trump’s policies.

The Fed’s “Beige Book” report showed some businesses were not waiting for tariffs to take effect to raise their prices.

The dollar hit three-month lows on March 5, while US stock indexes, which had fallen steadily this week, found at least a temporary footing.

The benchmark S&P 500 Index rose 1.1 per cent, retracing about a third of its decline from the previous two days.

Mr Trump has also imposed an extra 10 per cent duty on Chinese goods, and China has responded with additional tariffs of its own.

The tariffs could have spelled trouble for Detroit’s big money-maker – pickup trucks – and they still may, barring a long-term deal.

One analysis suggested that the levies would have added an average of US$3,000 (S$4,000) to vehicles and up to US$7,000 on nameplates coming from Mexican and Canadian plants.

That would be a blow to buyers who, according to an Edmunds survey, typically lean Republican.

Mr Trump’s announcement came one day after a phone call with the chief executives of Ford, GM and Stellantis.

Vehicles made by the three companies comply with the USMCA’s complex rules that require 75 per cent North American content in order to get duty-free access to the US market.

The rules also require 40 per cent of a passenger car’s content to be 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 per cent.

Mr Matt Blunt, president of the American Automotive Policy Council, which represents the three companies, said: “Ford, GM and Stellantis applaud President Trump for recognising that vehicles and parts that meet the high US and regional USMCA content requirements should be exempt from these tariffs.”

Automakers support boosting US investment but want certainty over tariff policies and vehicle emissions rules before making dramatic changes, two industry sources said.

An exemption would also benefit some foreign brand automakers with large US production footprints, including Honda and Toyota, but some competitors that do not comply would have to pay the full 25 per cent US tariffs. REUTERS