Trump exempts some automakers from Canada, Mexico tariffs for one month

US President Donald Trump will exempt automakers from his punishing 25% tariffs on Canada and Mexico for one month as long as they comply with existing free trade rules, the White House said on Wednesday, a development that halted at least for now Wall Street’s steepest skid in nearly three months.

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

But Trump made clear he was not calling off his trade war with Canada and Mexico as he pressures both countries to deter fentanyl smuggling. After a phone call with Canadian 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 uncertainty for US corporations and sapped consumer confidence, leading to a selloff in stocks in recent days.

General Motors GM.N shares were up 7.2% and Ford F.N gained 5.8% on Wednesday, but both 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 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 STLAM.MI.

Trump also might eliminate the 10% tariff on Canadian energy imports, such as crude oil and gasoline, that comply with the USMCA rules of origin, a source familiar with the discussions said.

Agriculture Secretary Brooke Rollins told Bloomberg the administration might consider removing tariffs from specific agricultural products and that “everything is on the table.”

“As far as specific exemptions and carveouts for the agriculture industry, perhaps for potash and fertilizer, et cetera — to be determined,” she said, according to Bloomberg.

Trump’s tariffs have damaged 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 most drug overdose deaths in the US, which have exceeded 100,000 annually in recent years. US 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% of all fentanyl seized in the US comes from across 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. The country relies on the United States for 75% of its exports and a third of all imports, and Canadian officials have pledged to fight back hard if necessary.

Canada could potentially use oil and gas exports as a lever in negotiations if US tariffs on Canadian imports escalate, Foreign Minister Melanie Joly told a Toronto business audience on Wednesday.

“There’s too much unpredictability and chaos coming out of the White House right now,” Joly told reporters, adding that Canada could not “go through this psychodrama every 30 days.”

Trade tensions already may be hurting the US New data on Wednesday showed slowing payroll growth as well as lower wage growth for workers who switch jobs, while a separate Federal Reserve report found widespread uncertainty among US businesses about Trump’s policies. The Fed’s “Beige Book” report showed some businesses were not waiting for tariffs to take effect to raise their prices.

The dollar hit three-month lows on Wednesday, while US stock indices, which had fallen steadily this week, found at least a temporary footing. The benchmark S&P 500 index rose 1.1%, retracing about a third of its decline from the previous two days.

Trump has also imposed an extra 10% duty on Chinese goods, and China has responded with additional tariffs of its own.

BOON FOR DETROIT

The tariffs could spell trouble for Detroit’s big money maker – pickup trucks – barring a long-term deal.

One analysis suggested the levies would have added an average of $3,000 to vehicles and up to $7,000 on nameplates coming from Mexican and Canadian plants. That would be a blow to buyers who, according to an Edmunds survey, typically lean Republican.

Trump’s announcement came one day after a phone call with the CEOs of Ford, GM and Stellantis.

Vehicles made by the three companies comply with the USMCA’s complex rules that require 75% North American content in order to get duty-free access to the US market.

The rules also require 40% of a passenger car’s content to be manufactured in the United States or Canada, based on a list of “core parts” including engines, transmissions, body panels and chassis components. The threshold for pickup trucks is 45%.

“American Automakers Ford, GM and Stellantis applaud President Trump for recognizing that vehicles and parts that meet the high US and regional USMCA content requirements should be exempt from these tariffs,” said Matt Blunt, president of the American Automotive Policy Council, which represents the three companies.

Automakers support boosting US investment but want certainty over tariff policies and vehicle emissions rules before making dramatic changes, two industry sources said.

An exemption also would benefit some foreign brand automakers with large US production footprints, including Honda 7267.T and Toyota 7203.T, but some competitors that don’t comply would have to pay the full 25% US tariffs.