Update (1415ET): It’s official, President Trump is exempting automakers from newly imposed tariffs on Mexico and Canada for one month, the White House said Wednesday.
“We are going to give a one month exemption on any autos coming through USMCA,” said WH spox Caroline Leavitt, referring to the trade deal negotiated with Canada and Mexico in Trump’s first term.
“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.”
As noted below, the announcement came after administration officials met Tuesday to discuss the matter with the heads of Ford, GM and Stellantis.
Trump and Trudeau Have It Out
As the Epoch Times noted earlier, following a phone call with Prime Minister Justin Trudeau to discuss recently imposed tariffs, President Donald Trump said he told the Canadian leader there hasn’t been enough done to stem the flow of fentanyl.
Trump also accused Trudeau of using the tariff issue to “stay in power.”
Trump discussed his phone call with Trudeau in two posts made on his Truth Social platform on the afternoon of March 5.
“Justin Trudeau, of Canada, called me to ask what could be done about Tariffs,” Trump wrote. “I told him that many people have died from Fentanyl that came through the Borders of Canada and Mexico, and nothing has convinced me that it has stopped.”
Trump also wrote that the call ended in a “’somewhat’ friendly manner,” while also accusing Trudeau of using the tariff issue to hold onto power in his final days in office.
“He was unable to tell me when the Canadian Election is taking place, which made me curious, like, what’s going on here? I then realized he is trying to use this issue to stay in power,” Trump said.
Trump’s social media posts came amid comments earlier that day from U.S. Commerce Secretary Howard Lutnick, who said he would announce a change to the tariffs policy.
“He’s going to come up with a plan this afternoon, we’re going to announce that plan,” Lutnick told Bloomberg on March 5.
Repeating comments made the previous day, Lutnick mentioned finding some “middle” ground on tariffs with Canada and Mexico.
“There’s going to be 25 percent tariffs,” Lutnick clarified. “It’s not the ’middle’ as in a number. I think it’s a middle in terms of USMCA [or] not USMCA,” suggesting items covered by the free trade deal between the countries would receive a different tariff treatment.
Canada responded to the U.S. tariffs by announcing an initial CA$30 billion surtax on a variety of U.S. goods from orange juice to motorcycles. The plan is for an additional CA$125 billion of goods to be slapped with a 25 percent surtax three weeks later if U.S. tariffs remain in place.
Trump imposed 25 percent tariffs on Canadian goods and 10 percent on its energy imports on March 4, after a 30-day pause expired. The pause had been applied for the Trump administration to assess measures taken by Canada to strengthen border security and counter fentanyl trafficking.
Trump said on March 3 there was “no room left” for Canada and Mexico to avoid tariffs and that “vast amounts of fentanyl” is entering the United States from the bordering countries.
In reaction to the U.S. tariffs on March 4, Trudeau said he doubts fentanyl is the issue, and instead suggested Trump is using them to cause the collapse of the Canadian economy to facilitate “annexation.”
Trudeau and his ministers have said that a very small amount of fentanyl from Canada crosses into the United States and that, nonetheless, the Canadian government has stepped up measures to combat the problem. Ottawa has also stressed that both countries’ economies are intricately linked and that consumers and businesses on both sides will lose in the trade war.
“They’ve chosen to launch a trade war that will, first and foremost, harm American families,” Trudeau said. “They’ve chosen to sabotage their own agenda that was supposed to usher in a new golden age for the United States and they’ve chosen to undermine the incredible work we’ve done together to tackle the scourge that is fentanyl, a drug that must be wiped from the face of the earth.”
Lutnick was asked by reporters on March 4 to respond to Trudeau’s comments about annexation made earlier that day, and noted the prime minister is in his last days in office.
“Justin Trudeau is running the end of his term and I don’t really want to think about the ridiculous things he said the last couple of days,” he said. “It’s sad, it’s time for him to go and let’s move on, have a new government in Canada.”
Along with the border and fentanyl-related tariffs, Canada is facing the threat of 25 percent tariffs on steel and aluminum, which Trump said would be levied against every country on March 12.
A broader U.S. trade action is slated for April 2, with details about reciprocal tariffs expected to be announced. The Trump administration has already said it considers Canada’s federal sales tax (GST), its Digital Services Tax aimed at tech giants, and its supply management system for goods like poultry and dairy as trade barriers acting as tariffs against the United States.
Trump and Lutnick have also spoken about bringing car manufacturing back to the United States, which could have a significant impact for the Canadian auto industry which is deeply integrated across the border.
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Update (1216ET): The Trump administration is considering giving automakers a one-month reprieve from newly imposed tariffs on Mexico and Canada, after administration officials met Tuesday to discuss the matter with the heads of Ford, GM and Stellantis, Bloomberg reports, citing anonymous officials.
The major Detroit automakers have aggressively sought to halt or revise Trump’s tariffs over concerns that they would have potentially catastrophic effects. (so, make your cars in the US?)
According to carmakers and experts cited, a rise in costs from the 25% tariffs imposed on US neighbors this week could send car prices skyrocketing by thousands of dollars almost immediately – and seize up supply chains.
In recent days, Commerce Secretary Howard Lutnick has hinted that there may be some carve-out exceptions to the initial tariffs – telling BBG television that the changes could be announced on Wednesday, including a potential reprieve for the auto sector in order to buy time to come up with plans to move both investments and production to the US.
The move sent both stocks and the Peso higher in mid-day trade.
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President Trump reiterated his focus on reciprocal tariffs in a speech overnight to a joint session of Congress, noting that there would be a “little disturbance” but that we are “ok with that.”
Global equity markets braced for a potential trade decision with Canada and Mexico overnight and into the US morning. This follows Trump imposing a 25% tariff on imported goods from Mexico and Canada on Tuesday and increased tariffs on Chinese goods to 20%, up from 10%.
On Tuesday afternoon, US Commerce Secretary Howard Lutnick stated on Fox Business, “I think the president is going to work something out with them,” adding, “It’s not going to be a pause, none of that pause stuff, but I think he’s going to figure out, you do more, and I’ll meet you in the middle some way, and we’re going to probably be announcing that tomorrow.”
Lutnick, speaking on Bloomberg on Wednesday morning, also reiterated that he expects a decision regarding Canada and Mexico this afternoon.
Latest trade headlines (courtesy of Bloomberg):
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LUTNICK: TRUMP CANADA, MEXICO DECISION EXPECTED THIS AFTERNOON
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LUTNICK: TRUMP MAYBE, MAYBE WILL CONSIDER GIVING RELIEF
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LUTNICK: AIMING FOR ‘SOMEWHERE IN THE MIDDLE’ ON CANADA, MEXICO
Ahead of the potential trade decision with America’s neighbors to the north and south, Goldman’s Brooke Roach, Kate McShane, and others outlined to clients late Tuesday companies within their coverage universe that have sourcing exposure to Mexico and Canada. They pointed out that clothing company Kontoor Brands has the most exposure to Mexico, while Canada Goose has the most exposure to… you guessed it: Canada
Roach and McShane noted that in their hardline stock universe coverage, many companies have either not disclosed their sourcing from Mexico and Canada or have a moderate level of exposure.
The analysts also identified which companies in their softlines coverage universe are most heavily exposed to the escalating trade war with China.
Hardlines coverage…
Comments on tariff headwind and mitigation commentary on softline coverage.
Comments on tariff headwind and mitigation commentary on hardline coverage.
Canada Goose shares in New York have been battered by same-store sales, weak wholesale orders, fierce competition, and a sluggish Chinese market. Also weighing on shares have been trade war concerns, as it sources 80% of its products from Canada. Shares are trading at a five-year low, with 22.5% of the float sold short.
The question remains for GOOS: Will positive US-Canada trade headlines be enough to ignite a squeeze?
Tyler Durden
Wed, 03/05/2025 – 14:15
