Following a 25 percent tax he imposed on America's closest trade partners the day before that shook global markets and sparked fierce opposition from business, President Trump announced on Wednesday that he would temporarily halt tariffs on automobiles entering the country from Canada and Mexico for a month.
White House press secretary Karoline Leavitt released a statement from President Trump on Wednesday, stating that the White House has conferred with the three biggest automakers and that vehicles entering under the United States-Mexico-Canada Agreement will be granted a one-month exception.
"The president is granting a one-month exemption to the companies affiliated with U.S.M.C.A. at their request to ensure they do not face financial hardship," the statement read. General Motors, Ford Motor, and Stellantis were the three automakers with which Mr. Trump had conversations.
Ms. Leavitt responded that Mr. Trump expected the automakers to return production to the United States when asked why he only provided a one-month respite. "Get on it, start investing, start moving, shift production here to the United States of America where they will pay no tariffs," she said, was the message.
The respite served as an example of Mr. Trump's haphazard approach to trade policy, as the president announced, paused, and then proceeded with a policy that has a significant impact on the North American economy in only a few weeks. According to someone briefed on the discussion, the decision was made following a conference call that Mr. Trump convened on Tuesday with Jim Farley, the CEO of Ford Motor Company, Mary T. Barra, the CEO of General Motors, John Elkann, the chairman of Stellantis, and William C. Ford, the chairman of Ford Motor Company.
According to the person, the executives informed the president that imposing tariffs on automobiles and parts from Canada and Mexico would essentially eliminate all of their companies' earnings by imposing additional costs on them totaling billions of dollars. They said that automobiles manufactured in such nations helped to sustain jobs at dealers, component factories, and other associated industries in the United States.
According to the source, they made investments in factories all over North America since they were guaranteed a free-trade zone on the continent under NAFTA and the USMCA, the trade pact that Mr. Trump signed with Canada and Mexico during his first term. Abruptly altering the zone's regulations would have disastrous results.
According to the source, executives from the three businesses stated that they would not protest the imposition of taxes on automobile imports from countries outside of North America. The United States imports a lot of automobiles from South Korea, Japan, and Germany in addition to Canada and Mexico.
According to Mr. Trump, the purpose of the tariffs was to persuade Canada and Mexico to halt the flow of migrants and drugs across the U.S. border. Even though Canada and Mexico promised to increase their efforts for border and drug trafficking enforcement, he decided to implement the tariffs this week after months of threats.
The leaders of Canada and Mexico have urged Mr. Trump to remove the tariffs, claiming they are unwarranted and unfair.
However, despite new approaches from Prime Minister Justin Trudeau, Mr. Trump refused to provide Canada with a more comprehensive respite. After speaking with Mr. Trudeau, Mr. Trump posted on social media that he was still not persuaded that Canada had gone far enough in halting the cross-border flow of fentanyl.
Mr. Trump claimed on Truth Social that he had informed Mr. Trudeau that "nothing has convinced me that it has stopped," adding that "many people have died from Fentanyl that came through the Borders of Canada and Mexico."
"He stated that things have improved, but I said, 'That's not good enough,'" the president continued.
Canadians have reacted negatively to claims that they are a major supply of drugs for the US, despite data showing that only a small proportion of fentanyl enters the US through Canada.
Canada said the tariffs were a breach of the commitments the United States made at the World Trade Organization and asked for discussions with the U.S. on the matter on Tuesday.
Mr. Trump and Mr. Trudeau were on the phone with Vice President JD Vance and Commerce Secretary Howard Lutnick. According to a senior Canadian official, the president brought up U.S. producers' access to the Canadian dairy market during the 50-minute conversation.
To reach a defusing agreement, Mr. Lutnick and Dominic LeBlanc, Canada's finance minister, will continue their discussion throughout the day. According to the official, Mr. Trudeau is not ready to remove Canada's retaliatory tariffs on American goods, but he is amenable to the possibility of selective duty elimination or reduction if the US chooses to do so for particular Canadian items. Since the official was not allowed to brief the media on the ongoing negotiations, they spoke on condition of anonymity.
"We will not submit," Mexican President Claudia Sheinbaum resolutely stated multiple times during a news conference on Wednesday.
Ms. Sheinbaum stated that she had a phone conversation with Mr. Trump on Thursday, but she was unaware of any new developments regarding Mr. Lutnick's claims of a tariff change. The Mexican government has called for a protest in Mexico City and would announce retaliatory actions on Sunday if tariffs are maintained, she added.
"We must all work together to protect our sovereignty," she stated.
Ms. Sheinbaum added that her government was already holding talks about new trade alliances, like as those with Canada and Chile, in reaction to the tariffs.
She declared, "We will seek to have more partnerships and agreements with other countries."
Stock markets throughout the world fell Tuesday as Mr. Trump announced plans to put a 25 percent tax on the majority of Canadian and Mexican goods, as well as an additional 10 percent tariff on all imports from China. However, shares for a few industries recovered significantly.
Hopes that Mr. Trump would reduce his tariffs on Canada and Mexico caused several automakers' shares to rise on Wednesday. Stellantis, Ford Motor, and General Motors all saw growth. The majority of automakers cannot simply or swiftly move production to the United States since they depend on factories and suppliers in those nations for automobiles and parts.
The industry's longer-term vulnerability to Mr. Trump's tariff parade won't be significantly mitigated by a one-month reprieve. These include "reciprocal" taxes that Mr. Trump intends to apply on April 2 and steel and aluminum tariffs that go into effect on March 12.
However, it might offer automakers an opportunity to accumulate vehicles and parts manufactured in Canada and Mexico, reducing the burden of future levies.
It is impossible to expect automakers to relocate their facilities to the United States in a month, according to Kevin Roberts, director of economic and market intelligence at CarGurus, an online marketplace for automobile buyers.
"You won't be able to shift a large amount of production in a month because the auto industry is so global and so interconnected," Mr. Roberts stated.
According to Mr. Roberts, a 25 percent tariff would raise the average cost of a car imported from Mexico by $10,000 and the average cost of a car coming from Canada by nearly $12,000.
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