Trump agrees to one-month tariff reprieve aimed at helping U.S. automakers

by Aaron Gregg, David J. Lynch

(c) 2025 , The Washington Post
Less than 48 hours after slapping tariffs on all goods from Canada and Mexico, President Donald Trump agreed to a one-month reprieve for automobile imports that qualify for duty-free treatment under the North American trade agreement negotiated during his first term.

The president’s decision followed a telephone conversation with executives from the Big Three automakers – General Motors, Ford and Stellantis – who sought relief from the new import taxes. Each of the automakers over the past several decades has developed complex supply chains that cross North American borders multiple times before delivering a finished product.

Along with disrupting those supply lines, Trump’s tariffs would have increased the cost of the typical new car by more than $10,000, industry groups said. Ford CEO Jim Farley last month warned that the president’s tariffs “would blow a hole in the U.S. industry” and give Asian and European producers a distinct competitive advantage.

“We spoke with the big three auto dealers. We are going to give a one-month exemption on any autos coming through USMCA,” said Karoline Leavitt, White House press secretary, referring to the 2018 United States-Mexico-Canada Agreement.

The industry’s feared stay-of-execution may be brief. Trump has vowed to move ahead on April 2 with a new plan for “reciprocal” tariffs, which is expected to result in sharp increases in U.S. border levies.

The Dow Jones Industrial Average rose on the White House announcement and was up less than 1 percent in early afternoon trading. Commerce Secretary Howard Lutnick said Wednesday that the Trump administration could exempt some segments of the market from tariffs that were imposed a day before, with a possible announcement on the matter coming Wednesday afternoon.

“The president is listening to offers from Mexico and Canada, he’s thinking about trying to do something in the middle,” Lutnick said in an interview on Bloomberg TV.

Lutnick said tariffs will probably cover “not 100 percent of all products and not none,” without offering details on which categories could get exemptions, and added, “it could well be autos, it could be others as well.”

The recent trading volatility reflects changing sentiment on Wall Street amid new economic policies and a fast-moving trade war. The S&P 500 gained around 5 percent in the three months following Election Day, but those gains have been erased as the administration has rolled out new tariff measures only to scale them back and then impose them once again.

“It’s hard to know what exactly is happening with tariffs moment to moment,” Comerica Bank chief economist Bill Adams said in an email.

On Tuesday, the Trump administration imposed 25 percent tariffs on everything Americans buy from Mexico from Canada, moving ahead with a policy that had been announced a month earlier but quickly put on hold. Imports from China are getting an additional 10 percent duty, bringing the overall tariff to 45 percent. All three countries responded with retaliatory measures of their own.

The Trump administration has characterized its trade actions as part of a broader effort to crack down on fentanyl and other drugs entering the country, with Mexico and Canada agreeing to provide more border security.

President Donald Trump, in an address to Congress on Tuesday, said he had recently met with automakers, but warned there will be some short-term pain associated with the tariffs. He called on manufacturers to move more of their operations to the United States, while hailing early announcements from Honda, Apple and Taiwan Semiconductor Manufacturing Co. as signs of early success.

The tariffs could protect U.S. industries that compete with foreign firms, but are expected to increase prices throughout 2025 and 2026, Adams said. Some economists are concerned that the new import duties, which Comerica estimates would amount to a tax difference of 0.5 percent to 1 percent of GDP, could complicate the Federal Reserve’s efforts to get inflation under control while slowing the economy more broadly.

The administration’s shifting messages about tariff policy have led many investors to cash out their positions amid uncertainty about what happens next, said Michael Farr of the D.C.-based investment firm Farr, Miller and Washington. Markets quaked Tuesday at the prospect of harsher trade policy, with the Dow sinking 1.5 percent for the day.

“Wall Street has done a pretty good job at ignoring tariff rhetoric as just rhetoric; the reaction this week is a response to the rhetoric becoming reality,” Farr said.

Leading automakers were among the industrial firms hit hard by Tuesday’s tariff news, but they regained some of that ground Wednesday morning. General Motors gained 4.8 percent by noon Eastern time, with Ford up 3.5 percent and Stellantis gaining 7.4 percent.

Consumer-facing sectors with significant ties to China saw no such reprieve. Abercrombie and Fitch was down 12 percent by noon Wednesday and Gap lost around 7 percent, after major retailers including Macy’s, Wayfair and Whirlpool sold off the day before.