President Donald Trump's administration said today it would give a one-month reprieve for the top three US auto-makers from the stiff tariffs he imposed Tuesday on energy and other imports from Canada and Mexico.
Trump told chief executives of GM, Ford and Chrysler that "we are going to give a one month exemption on any autos coming through" the US-Mexico-Canada (USMCA) free trade agreement, specifically for those car manufacturers, the White House said this afternoon.
Nearly all trade between the three countries is covered by the USMCA, so a return to any terms of that agreement would mean lifting tariffs Trump imposed on Tuesday. The USMCA rules exempt cars manufactured in any of the three countries using parts made in or substantially transformed in any of the three countries, from US tariffs.
The tightly-intertwined US and Canadian auto manufacturing industry could grind to a halt in as little as 10 days due to US tariffs, Ontario premier Doug Ford said on Tuesday. The 25pc tariff Trump imposed would be applied multiple times as raw materials and partially assembled vehicle components can cross the US-Canadian border between manufacturing plants as many as eight times before becoming a finished vehicle.
The temporary exemption applied to a segment of the North American auto manufacturing industry is the first instance of a hasty policy retreat the Trump administration began to signal late Tuesday, the very day Canada and Mexico tariffs went into effect, roiling financial markets.
Trump and the White House have alternatively downplayed the negative economic effects of tariffs, or suggested that the additional costs from import taxes would fall on foreign producers, not US consumers.
"Tariffs are about making America rich again," Trump said in an address to Congress on Tuesday. "There will be a little disturbance, but we are OK with that."
Trump also said that his policy agenda "will allow our auto industry to absolutely boom".
But the tariffs Trump imposed have caused consternation and complaints across vast segments of the US economy, including the oil and gas sector he promised to champion.
"We cannot stress enough the importance of the energy interconnection between our three nations, especially Canadian oil and electricity, to the American economy," oil industry group American Energy Alliance president Tom Pyle said today. "Imposing tariffs on these essential energy sources would unnecessarily disrupt the complex and integrated supply chain that has developed over 50 years."
The White House said that Trump "is open to hearing about additional exemptions".
Confusing signals
The Trump administration accompanied the decision to temporarily exempt the US auto-makers with a barrage of mixed signals, insults lobbed at Canadian prime minister Justin Trudeau and accusations of insufficient cooperation on interdiction of drugs, which is the pretext for tariffs.
The one-month reprieve should be sufficient for auto manufacturers "to get on it, start investing, start moving shift production here to the US," the White House said.
It also said that the one-month reprieve period would coincide with the 2 April target date for Trump's "reciprocal tariffs" on all foreign auto imports, and that there would be no additional reprieves.
"I also told Governor Justin Trudeau of Canada that he largely caused the problems we have with them because of his Weak Border Policies," Trump said this afternoon via his social media platform, following a conversation with Canada's leader.
Trudeau in his remarks on Tuesday called Trump's tariffs "a very dumb thing to do" and vowed to keep the retaliatory Canadian tariffs in place until Trump completely reverses his tariffs on Canadian imports.
