U.S. President Donald Trump will exempt automakers from his punishing 25% tariffs on Canada and Mexico for one month as long as they comply with existing free trade rules, the White House said on Wednesday, March 5th, a development that halted at least for now Wall Street’s steepest skid in nearly three months.
Trump is also open to hearing about other products that should be exempted from the tariffs, which took effect on Tuesday, March 4th, the White House said.
But Trump made clear he was not calling off his trade war with Canada and Mexico as he pressures both countries to deter fentanyl smuggling. After a phone call with Canadian Prime Minister Justin Trudeau, 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,'” Trump wrote on his Truth Social platform. “The call ended in a ‘somewhat’ friendly manner!”
Public data shows only 0.2% of all fentanyl seized in the U.S. comes from across the Canadian border, while the vast majority originates from the southern border.
Canada is willing to reduce its retaliation to U.S. 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, the source, who spoke on the condition of anonymity, cautioned.
The one-month reprieve sparked a rebound in auto stocks, but trade tensions have created uncertainty for U.S. corporations and sapped consumer confidence, leading to a selloff in stocks in recent days.
General Motors shares were up 7.2% and Ford gained 5.8% on Wednesday, but both shares are still down on the year.
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 into systems and finished vehicles.
A one-month exemption for cars and trucks that comply with the U.S.-Mexico-Canada Agreement’s complex content rules, as Trump has outlined, would be a boon for Ford, GM and Stellantis.
Trump also might eliminate the 10% tariff on Canadian energy imports, such as crude oil and gasoline, that comply with the USMCA rules of origin, a source familiar with the discussions said.
Agriculture Secretary Brooke Rollins told Bloomberg it was “to be determined” whether specific agricultural products such as potash and fertilizer might be carved out, saying “everything is on the table.”
Trump’s tariffs have damaged relations between the three trading partners. Canada has hit back with tariffs of its own on selected U.S. 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 after Trump’s tariffs, a senior Mexican government official said. Nearly 60% of Pemex’s exported barrels went to the U.S. last year.
Source: Reuters
