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President Donald Trump exempted Mexican and Canadian goods covered by the North American trade agreement known as USMCA from his 25% tariffs, offering major reprieves to the US’s two largest trading partners.
Trump signed orders Thursday paring back the tariffs, which are related to illegal immigration and fentanyl tracking, until April 2. That is the date when the president is expected to start unveiling plans for so-called reciprocal duties on nations around the world as well as sector-specific duties.
“They’ve been working much harder lately, do you notice that? On people coming in and drugs. We’ve made tremendous progress on both,” Trump said in the Oval Office, referring to Mexico and Canada.
Automobiles and parts that meet USMCA requirements are among the products exempt from the tariffs. Canadian potash used heavily in fertilizers for US agricultural producers faces a lower 10% duty. The White House estimates that 62% of Canadian imports will still be subject to the tariffs, most of which are energy products that are being tariffed at a 10% rate, and half of goods coming from Mexico. A White House official cautioned those proportions could change as importers rush to comply with the new rules.
Trump warned that relief for automakers will be short lived, saying he would not sign another extension next month.
“I told them that’s it, this is a short-term deal,” he president said, adding he told auto executives not to come back and ask for relief again.
The decision nonetheless marks a significant reversal by Trump, who on Tuesday had announced the largest tariff increase in a century only to back down 48 hours later as stocks were hammered and Republicans expressed concern about the economic consequences.
The president downplayed the reaction, saying “I’m not even looking at the market.” Trump argued that foreign countries are “ripping us off” and that the tariffs would put the US on a stronger footing.
“There’ll always be a little short-term interruption. I don’t think it’s going to be big,” Trump said.
Exempting automobiles from the tariffs was done in order to minimize disruption to the industry and auto workers, according to the White House official.
The US, Mexico and Canada have a deeply integrated auto supply chain and Detroit’s Big Three car companies had lobbied the administration for weeks for a carve out.
Using 2024 trade data, about 49% of US imports from Mexico are exempt from duties under the USMCA, according to US Census data.
An additional 41% of imports fall into under a grey area, given that goods previously qualified under a different exemption, such as the so-called “most-favored nation” rate.
If those goods are no longer allowed to trade under those preferential rates, providers may look to switch to complying with USMCA to avoid the 25% fees.
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