TMTPOST -- The Trump administration is raising hopes of concession right after it started implementation of the first round of additional tariffs on U.S. major trading partners.
Credit：China Central Television
U.S. President Donald Trump decided to grant a one-month exemption from tariffs to automobiles imported from Canada and Mexico, according to White House press secretary Karoline Leavitt. The White House spokesperson on Wednesday confirmed the decision was made after Trump talked with the “Big 3” three Detroit automakers, Ford, General Motors and Stellantis in a call under their request.
“Reciprocal tariffs will still go into effect on April 2, but at the request of the companies associated with USMCA, the president is giving them an exemption for one month so they are not at an economic disadvantage,” Leavitt said on behalf of Trump. USMCA, namely the U.S.-Mexico-Canada Agreement, is a trade agreement that Trump's first administration negotiated to replace the decades-old North American Free Trade Agreement.
As to whether the one-month period is enough for the automakers to prepare for the new levies, Leavitt said Trump told these companies seeking an exemption “they should get on it, start investing, start moving, shift production here to the United States of America where they will pay no tariff.”
Leavitt said Trump is “open” to hearing requests from other industries seeking exemptions as well. The White House said the one-month exemption from tariffs is granted to automakers whose car parts comply with USMCA.
Ford, General Motors and Stellantis applaud the president for “recognizing that vehicles and parts that meet the high U.S. and regional USMCA content requirements should be exempt from these tariffs,” said Matt Blunt, president of the American Automotive Policy Council, a trade group representing the “Big 3.”
CNBC learned from sources that General Motors CEO Mary Barra, Stellantis Chairman John Elkann, Ford CEO Jim Farley and Ford Chair Bill Ford participated in the call with Trump on exemption on Tuesday. Trump that day night reiterated his plan to impose reciprocal tariffs on April 2 during his address to Congress.
The USMCA requires 40% of a passenger car’s content to be made in U.S. and Canada, based on a list of core parts including engines, transmissions, body panels and chassis components. The threshold pickup trucks is 45%.
Automobile manufacturers support boostign investments in U.S., but want certainty over tariff policies and vehicle emissions rules before making dramatic changes, a Reuters report on Wednesday quoted industry sources. Some automakers that don’t comply with USMCA rules would have to pay the full 25% U.S. tariffs, the report noted.
The Trump administration’s 25% additional tariffs on products imported from Canada and Mexico took effect on Tuesday, with the execption of a 10% levy on Canadian oil, and levy of 10% on imports from China effective the same day, making extra tariffs on China doubled to 20% since Trump returned to White House. China and Canada immediately retaliated with their duties on certain U.S. exports, while Mexico said it would deliver its response on Sunday.
The Canadian government said on Tuesday it moved forward 25% retaliatory tariffs on imported goods, beginning immediately with a list of goods worth 30 billion Canadian dollars the same day. The scope of the Canadian counter tariffs will be increased to $155 billion Canadian dollars if the current U.S. tariffs are maintained, and the scope could also be increased if new tariffs are imposed.
Calling the tariffs “no justification”, Canadian Prime Minister Justin Trudeau said the country also planned to challenges the “illegal actions”at the World Trade Organization (WTO) and through the USMCA. In the meantime, the tariffs imposed by Canada will remain in place until the U.S. tariffs are withdrawn and not a moment sooner, said Trudeau.
U.S. Commerce Secretary Howard Lutnick suggested late Tuesday Trump may lower tariffs on Canada and Mexico. “Both the Canadians and Mexicans were on the phone with me all day today trying to show that they’ll do better” on reducing fentanyl flows into the U.S., Lutnick spoke with Fox News host Larry Kudow. “So I think [Trump] is going to work something out with them. ”
Lutnick said the Trump administration would not pause implementation of extra tariffs anymore, but the United States probably reaches compromise with Canada and Mexico as Trump is going to “figure out, ‘you do more, and I’ll meet you in the middle some way.’”
Lutnick implied Trump could reduce tariffs if the U.S.-Mexico-Canada Agreement (USMCA) is implemented. “The president is considering giving you relief if you live under those rules,” Lutnick said. “If you haven’t lived under those rules, well, then you have to pay the tariff.”
But Canada's Minister of Foreign Affairs Mélanie Joly told BBC Tuesday night that her office had not been contacted about any plans around reducing tariffs. US officials "can say many things" but "the only one that really takes a decision is President Trump," Joly said.
In an interview with Bloomberg Wednesday, Lutnick said Trump could consider giving Canada and Mexico some relief on tariffs, which might lead to carveouts to the 25% tariffs that went into effect a day before. The commerce chief repeated the phrase “somewhere in the middle” he used Tuesday. “Somewhere in the middle is a likely outcome,” he said.
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