US exempts automakers from new Canada and Mexico tariffs for 1 month

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 Wednesday.

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

He also made clear he was not calling off his trade war with Canada and Mexico as he pressured the two countries to deter fentanyl smuggling. After a phone call with Canada's 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!" Trudeau's office said discussions would continue. Official statistics show a small fraction of fentanyl in the US comes across the Canadian border.

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 selloff in stocks in recent days.

General Motors shares were up 7 per cent and Ford gained 5.6 per cent on Wednesday, but both companies' 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 up into systems and finished vehicles.

A one-month exemption for cars and trucks that comply with the US-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 per cent tariff on Canadian energy imports, such as crude oil and gasoline, which comply with the USMCA rules of origin, a source familiar with the discussions said.

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.

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 not often inspected by customs agents.

Public data shows 0.2 per cent of all fentanyl seized in the US comes from the Canadian border, while the vast majority originates from the southern border. US officials seized roughly one-third of an ounce along the Canadian border in January, down from 5.5 pounds in November.

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