Trump delays auto tariffs on Mexico and Canada by one month

Donald Trump is wavering on trade policy. Just one day after imposing 25% tariffs on products from Mexico and Canada, he has announced a one-month moratorium on tariffs in the automotive sector. Commerce Secretary Howard Lutnick insisted that the United States was open to easing protectionist measures against its neighbors. Meanwhile, companies have warned of the significant disruptions that Trump’s erratic and unpredictable trade policy could pose to their industry and the broader U.S. economy.

“We spoke with the Big Three auto dealers. We are going to give a one-month exemption on any autos coming through USMCA,” said White House spokeswoman Karoline Leavitt in a White House briefing, referring to the trade deal Trump negotiated with Canada and Mexico in his first term.

“Reciprocal tariffs will still go into effect on April 2. But at the request of the companies associated with USMCA, the president is giving them an exemption for one month so they are not at an economic disadvantage,” she added.

Trump inaccurately refers to other protectionist measures the U.S. seeks to implement as “reciprocal tariffs.” Leavitt said that the president is open to considering additional exemptions beyond the automotive sector, further fueling uncertainty and confusion.

It is also unclear what tariffs will apply to car imports from Mexico and Canada as of April 2, and whether the now-suspended 25% tariffs will be layered on top of the so-called reciprocal tariffs. Adding to the chaos, Trump also announced a separate 25% tariff on cars starting in April. Ultimately, the situation will depend on Trump’s arbitrary decision.

On Wednesday, Trump spoke with Canadian Prime Minister Justin Trudeau, though the conversation appears to have yielded little progress. It is also uncertain whether he will engage in talks with Mexico’s president, Claudia Sheinbaum.

“Justin Trudeau, of Canada, called me to ask what could be done about Tariffs,” Trump posted on social media. “I told him that many people have died from Fentanyl that came through the Borders of Canada and Mexico, and nothing has convinced me that it has stopped. He said that it’s gotten better, but I said, ‘That’s not good enough.' The call ended in a ‘somewhat’ friendly manner! He was unable to tell me when the Canadian Election is taking place, which made me curious, like, what’s going on here? I then realized he is trying to use this issue to stay in power. Good luck Justin!”

In another later message, Trump held Trudeau directly responsible for fentanyl deaths in the United States.

Canada has approved retaliatory trade measures and has made it clear that it will not withdraw them in exchange for partial relief from U.S. tariffs. Trump’s reversal on auto tariffs seems driven more by concerns over the economic damage caused by his administration’s policies rather than diplomatic pressure. When Joe Biden left office, the U.S. economy was thriving, admired globally, and experiencing strong job growth.

“What [Trump] is thinking about is which sections of the market that can maybe — maybe — he’ll consider giving them relief,” Lutnick said Wednedsay in an interview on Bloomberg Television. While some categories will still face the 25% levy, others may be spared. “It could well be autos. Could be others as well,” he said.

There was discussion about reducing tariffs for specific products that comply with the regulations of the Mexico-U.S.-Canada Agreement (TMEC/USMCA), which Trump himself negotiated during his first term. Lutnick stated that, to his understanding, the Big Three U.S. automakers — Ford, General Motors, and Stellantis-owned Chrysler — meet TMEC standards.

Trump administration officials have been in contact with executives from these companies, who have warned of the tariffs' negative effects. Following the suspension of the tariffs, the automakers’ stocks surged in the market.

“There are going to be tariffs, let’s be clear. But what he’s thinking about is which sections of the market that can maybe — maybe — he’ll consider giving them relief until we get to, of course, April 2,” Lutnick said, referencing the date Trump has set for approving what he calls reciprocal tariffs for all countries.

Inflation expectations skyrocket

The latest shock to financial markets, triggered by the new tariffs and worsening economic outlook, may have played a role in Trump’s decision to reconsider his policies. While stock markets rebounded after Lutnick hinted at a possible correction, much of the damage from the administration’s improvisation, uncertainty, and policy swings had already been done. Inflation expectations have surged, consumer confidence has dropped sharply, businesses remain on high alert, and multiple indicators point to a slowdown in economic growth.

Trump continues to defend his protectionist approach, though in his speech before Congress on Tuesday, he acknowledged potential downsides. “Tariffs are about making America rich again and making America great again. And it’s happening, and it will happen rather quickly,” Trump said. “There will be a little disturbance, but we’re OK with that. It won’t be much.”

The president reaffirmed his commitment to increasing import tariffs, particularly the so-called reciprocal tariffs set to take effect on April 2 — not April 1, which is April Fool’s Day. “I’m a very superstitious person,” he explained. He then doubled down on his stance, arguing that tariffs not only safeguard the economy but also protect “the soul” of the United States.

“Whatever they tariff us, other countries, we will tariff them,” he told Congress. “Whatever they tax us, we will tax them. If they do non-monetary tariffs to keep us out of their market, then we will do non-monetary barriers to keep them out of our market. There’s a lot of that too. They don’t even allow us in their market. We will take in trillions and trillions of dollars and create jobs like we have never seen before.”

The president then baselessly claimed that the United States pays subsidies of hundreds of billions of dollars to Mexico and Canada, presumably in reference to the trade deficit.

“Other countries have used tariffs against us for decades and now it’s our turn to start using them against those other countries,” Trump continued. “On average, the European Union, China, Brazil, India, Mexico and Canada — have you heard of them? And countless other nations charge us tremendously higher tariffs than we charge them. It’s very unfair."

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