Carmakers win reprieve from Canada and Mexico tariffs

US President Donald Trump said he would temporarily spare carmakers from a new 25% import tax imposed on Canada and Mexico, just a day after the tariffs came into effect.

The announcement by the White House came even as Trump continued to blast Canada for not doing enough to stop drugs from entering the US.

“Nothing has convinced me that it has stopped,” Trump wrote on social media after a phone call with Canadian Prime Minister Justin Trudeau about the economic disruption caused by new trade tariffs.

News of the relief helped to boost US shares, which closed higher after two days of declines that had wiped out gains the S&P 500 had seen since the presidential election in November.

The tariff exemption is for cars made in North America that comply with the continent’s existing free trade agreement.

That deal, which was negotiated by Trump during his first term, sets out rules for how much of a car must be made in each country to qualify for duty-free treatment.

White House press secretary Karoline Leavitt said Trump had backed a one-month exemption to the tariffs for the car industry after pleas from Ford, General Motors and Stellantis, which have supply chains that stretch across North America.

The new tariffs – which are a tax applied as goods enter the country – were poised to disrupt a third of car production in North America within a week, according to analysts at S&P Global Mobility.

Shares in Ford were up by more than 5% after the announcement, while General Motors shares rose more than 7%. Stellantis shares in the US rose more than 9%.

“The president is open to hearing about additional exemptions,” Ms Leavitt added. “He always has open dialogue and he’ll always do what he believes is right for the American people.”

Ford said in a statement the company will continue to have a “healthy and candid dialogue with the administration” and touted its investment of billions in the United States.

Goods worth billions cross the borders of the US, Canada and Mexico each day and their economies are deeply integrated.

The Canadian Chamber of Commerce warned that affordability would be hurt and business relationships would suffer, despite the chances for targeted relief.

“We’ve seen this movie before. President Trump puts tariffs in place and then doles out exemptions one at a time,” said Matthew Holmes, the organisation’s chief of public policy. “That is not how a long-lasting trade alliance is built.”

Ontario Premier Doug Ford told Canadian media that the one-month reprieve for automakers would not alter his plans for retaliation, which have already included a halt to sales of US liquor in the province.

Trump’s moves, and his threats to impose “reciprocal” tariffs on countries around the world, have raised fears of a wider trade war.

As well as Mexico and Canada, he hit goods from China with an additional tariff on Tuesday, raising levies to at least 20% and prompting the country to retaliate against US exports, including agricultural products.

Canada also responded with its own retaliatory import levies on US goods after Washington’s 25% tariffs on its two neighbours came into effect on Tuesday, affecting items including peanut butter, oranges and wine.

Mexico also said it would respond, including with its own tariffs.

“I don’t know where we go with this and how it ends. I just hope that it ends quickly,” said Iowa farmer Bob Hemesath, the board president for lobby group Farmers for Free Trade, which has raised concerns about the tariffs.

Big retailers in the US have already warned the measures will lead to higher prices on goods such as avocados within days, while economists are forecasting economic recessions in Mexico and Canada triggered by the tariffs.

Trump has acknowledged his moves may lead to short-term economic pain in the US, but said he wants to protect US industry and boost manufacturing.

He has cast the tariffs this week against goods from America’s two neighbours, as well as China, as a response to the flow of migrants and fentanyl across the border.

Writing on social media on Wednesday, Trump said he had told Trudeau that the situation was not improving.

“He said that it’s gotten better, but I said, ‘That’s not good enough’,” Trump said.

Trudeau has called called Trump’s claims about drugs a “completely bogus” justification for tariffs on his country.

White House officials have said Trump still intends to move ahead on 2 April with plans for reciprocal tariffs on other countries around the world that he sees as treating the US unfairly.

“There are going to be tariffs – let’s be clear – but what he’s thinking about is which sections of the market that maybe he’ll consider giving them relief until we get to, of course, April 2,” Commerce Secretary Howard Lutnick told Bloomberg on Wednesday.