The administration of U.S. President Donald Trump now says that Canadian and Mexican automotive parts that are compliant with existing trade deals will be exempt from U.S. import tariffs.
New guidance from U.S. Customs and Border Protection says that auto parts compliant with the “Canada-U.S.-Mexico Agreement on Trade” will not have additional import duties levied on them. The news has the stocks of the major U.S. automakers, General Motors (GM), Ford Motor Co. (F), and Stellantis (STLA) trending higher.
The news is also a positive development for Canada and Mexico’s automotive and manufacturing industries that feed the U.S. auto industry based in Detroit, Michigan. President Trump slapped a 25% tariff on all vehicle imports to the U.S. last month but has now made a carveout for car parts that are compliant with the existing North American trade pact.
General Motors and Ford had lobbied hard that it would be extremely difficult on their businesses should tariffs apply to auto parts from Canada and Mexico. North American made auto parts typically cross the border with the U.S. multiple times before a vehicle is completed. General Motors CEO Mary Barra warned earlier this week that import tariffs could cost the automaker $5 billion in lost revenue this year.
President Trump also signed an executive order giving American automakers relief from 25% duties imposed on steel and aluminum products, and signed an order offering automakers that finish their vehicles in the U.S. a temporary rebate on imported auto parts that is equal to 15% of a vehicle’s retail price.
While President Trump has claimed his tariffs will bring auto manufacturing back to the U.S., the sector has been largely integrated with Canada and Mexico since the signing of the 1965 “Auto Pact” trade deal. The Canada-U.S.-Mexico Agreement on Trade that currently covers North America was negotiated during the first Trump presidency.
GM stock has declined 12% this year.