Automotive Sector Gets A 30-Day Tariff Break

Following talks with Canadian Prime Minister Justin Trudeau, the United States federal government announced that the automotive industry would get a one-month break from cross-border tariffs on Wednesday.

Karoline Leavitt, White House press secretary, announced the news this afternoon, saying that “we are going to give a one month exemption on any autos coming through USMCA,” the United States Mexico Canada trade agreement that replaced the North American Free Trade Agreement during the first Trump presidency.

However, Leavitt said that reciprocal tariff will go into effect on April 2. In addition, other sectors of the economy will still be subject to a wide-ranging 25 per cent tariff on imported goods.

The auto sector is particularly sensitive to tariffs, though, as supply lines are highly integrated across Canada, the U.S., and Mexico. In fact, many parts must cross borders multiple times during the automaking process, compounding the effect of President Donald Trump’s unprovoked trade war.

According to the head of the Automotive Parts Manufacturer’s Association, Flavio Volpe, a 25 per cent tariff on the auto industry will cause parts plants across North America to start shutting down within weeks. He told the Toronto Star that the profit margins for the industry are so slim that weeks’ worth of profit could be wiped out in days with the sudden introduction of tariffs. Similarly, the head of Unifor, the union that represents Canada’s autoworkers, told the outlet that the tariffs would be a worse industrial disruption than the COVID-19 pandemic.

Meanwhile, the Globe and Mail reported that the combination of U.S. tariffs and reciprocal Canadian countertariffs would lead to an average price hike of between $5,000 and $6,000 on new vehicles for Canadian consumers.

As a result of this pause in tariffs on vehicles, shares in Detroit’s big three automakers and Canada’s major parts makers rose on their respective stock markets after suffering losses earlier in the week.