Trump Grants One-Month Tariff Exemption for Automakers Amid Ongoing Trade Tensions

President Donald Trump has announced a one-month exemption from his 25% tariffs on Canada and Mexico for automakers, provided they adhere to the existing free trade agreement, the White House confirmed on Wednesday. Trump is also open to considering other products for exemption from the tariffs, which went into effect on Tuesday.
Despite this temporary reprieve, Trump emphasized that he is not backing down from his trade conflict with Canada and Mexico, which he is using as leverage to curb fentanyl smuggling. After speaking with Canadian Prime Minister Justin Trudeau, Trump expressed that he was unconvinced that progress had been made. “He said that it’s gotten better, but I said, ‘That’s not good enough,’” Trump shared on his Truth Social platform. “The call ended in a ‘somewhat’ friendly manner!” Trudeau’s office said talks would continue, although official statistics show only a small portion of fentanyl entering the U.S. comes from Canada.
The brief exemption triggered a rise in auto stock prices, but the ongoing trade tensions have created significant uncertainty for U.S. businesses and reduced consumer confidence, contributing to recent stock declines.
Shares of General Motors rose by 7%, and Ford increased by 5.6% on Wednesday, though both companies’ stocks remain down for the year. The tariffs are particularly challenging for automakers, as they often produce vehicles across all three countries and ship parts back and forth through North American borders.
Trump’s one-month exemption for cars and trucks meeting the U.S.-Mexico-Canada Agreement’s (USMCA) content requirements would benefit automakers like Ford, GM, and Stellantis.
Trump is also considering removing the 10% tariff on Canadian energy imports, such as crude oil and gasoline, that meet USMCA rules, according to sources familiar with the discussions.
These tariffs risk damaging relations between the three nations. Canada has retaliated with its own tariffs on certain U.S. imports, and Mexico has warned it will do the same. Fentanyl, which has contributed to a significant rise in drug overdose deaths in the U.S., is a central issue in the trade tensions. Officials claim that Canada and Mexico are key transit points for the drug and its precursor chemicals entering the U.S. through small, often uninspected shipments.
While U.S. data shows only a tiny fraction (0.2%) of fentanyl seizures come from the Canadian border, the majority flows across the southern border. In January, U.S. authorities intercepted only 1/3 of an ounce of fentanyl at the Canadian border, compared to 5.5 pounds in November.
The tariffs could also jeopardize Canada’s economic recovery and even lead to a recession, as the country relies heavily on the U.S. for exports and imports, with 75% of Canadian exports and a third of imports tied to the U.S. market.