Trump's Tariff Reprieve: What It Means for US Automakers and Trade

The White House is giving the American automotive industry a month's reprieve from the 25-percent tariffs on goods from Canada and Mexico. The automotive sector is the obvious own goal for the USA, says economist Elisabet Kopelman.

» Published: March 05 2025

Trump's Tariff Reprieve: What It Means for US Automakers and Trade
Photo: Paul Sancya/AP/TT

President Donald Trump states in a written statement that negotiations have been held with General Motors, Ford, and Stellantis, all of which have significant trade with Mexico and Canada.

"We spoke with the three major vehicle manufacturers. We will give a one-month reprieve for all vehicles coming in via USMCA," he says.

USMCA is the North American free trade agreement negotiated with Canada and Mexico during Trump's previous term.

The Trump administration introduced 25-percent tariffs against neighboring countries earlier in the week, contrary to the agreement. The new date for when the automotive industry's tariffs will be introduced is April 2.

I'm not surprised. The automotive sector is the obvious self-goal for the USA since the tariffs there hit American companies so extremely hard, says Kopelman, a US economist at SEB.

The shares of automotive giants have risen sharply on the New York stock exchange on Wednesday, and helped the stock market rise overall.

Trudeau stands firm

When Canada's Prime Minister Justin Trudeau responded by announcing tariffs on goods from the USA, Trump's immediate response was that such countermeasures from "Canada's governor" would be met with a new increase in US tariffs.

The Trump administration is now negotiating with Canada and Mexico, and according to US Trade Minister Howard Lutnick, President Trump is willing to compromise.

A high-ranking Canadian government source tells Bloomberg that Trudeau does not intend to withdraw his package of countermeasures in exchange for individual American exemptions.

Reasonable, thinks Elisabet Kopelman at SEB.

This is not a concession to Canada, but a concession that the USA is making to itself. Canada must look out for its own interests, and this will be troublesome for them even if the automotive industry is exempted.

Calming signal

According to Kopelman, Trump's willingness to compromise may likely come to life if Canada and Mexico establish the same tariffs against the rest of the world as the USA – so that goods and components from other countries do not enter the American economy via neighboring countries.

Mexico has taken such steps, and the statement was met with a statement from US Finance Minister Scott Bessent, who welcomed this and said he hoped Canada would take a step in that direction as well.

Wednesday's announcement sends a calming signal to the market, she continues.

It signals that the tariffs are not set in stone, but that this, as before, is partly a negotiating tactic.

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By TT News AgencyAltered and translated by Sweden Herald under licensen from TT News Agency

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