Trump postpones auto tariffs

White House grants auto industry a grace period...

The US government has suspended the latest 25% additional tariffs imposed on Canada and Mexico for the auto industry for a month. These tariffs are extremely painful for the American auto industry, as it is is highly integrated within the North American free trade area (USMCA). Confident in the continued existence of the free trade agreements, Mexico in particular has invested heavily in building up its auto industry as an integral part of the US auto sector. Last year, Mexico exported over $180 billion in autos and parts to the US (equivalent to a third of Mexico's exports to the US). Canada delivered almost $57 billion worth of autos and parts in 2024 (13.7% of US imports from Canada).

... but appears to be standing firm on the issue

What is remarkable is not so much the postponement of the tariffs by a month – even if this did cause noticeable relief on the markets. What is more important is that President Trump apparently intends to remain firm on the matter. The US, and particularly its automotive industry, is to be protected by high tariff walls. This should stimulate investment in the US, including from foreign companies that could avoid tariffs by setting up production in the US.

The short-term problem for the automotive industry is that supply chains cannot be moved inland or new plants built in a month. It is therefore foreseeable that the pain in the automotive industry will increase significantly in the coming months when many important intermediate products become more expensive. Consumers face the threat of significantly higher prices.

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