The Canada-U.S. trade war has taken another detour. And, fittingly, it involves cars.
What happened: Donald Trump granted a one-month exemption from the new 25% import tariffs for vehicles through the Canada-United States-Mexico Agreement. He reportedly came to the decision after talking with the heads of Ford, General Motors, and Stellantis.
Why it matters: The break allows automakers to strategize potential restructuring, giving Canada time to push for more relief, and stems any immediate disasters for a sector that is one of the most vulnerable to tariffs because of its deep integration across North America.
- Levying 25% tariffs on auto parts that cross the border multiple times and vehicles that are constructed in cities across the continent would eliminate thin profit margins.
- Predictions about the impact of the tariffs are grim. The head of the Automotive Parts Manufacturers’ Association said tariffs would cause plant shutdowns in about a week.
Big picture: As Trump talked with Justin Trudeau yesterday for the first time since he levied the tariffs, the White House press secretary said Trump was “open” to more exemptions. But Canada’s finance minister said the government is only interested in ending tariffs entirely.
Plus: Canada also initiated a formal trade dispute by requesting consultations with the U.S. through the World Trade Organization, a strategy it took with Trump’s 2017 steel and aluminum tariffs.—QH