Trump suspends tariffs on Canada and Mexico carmakers

Earlier this week, Trump had announced that he was dropping a 25% tariff on Mexico and Canada.

That stance changed rather dramatically toward the end of the week with significant pushback from both countries on the tariffs.

Trump has since decided that he would suspend the tariffs for carmakers, among others, for a month.

Backing Down

I have stated from the outset that what most people don’t understand about Trump and tariffs is that Trump uses them as a position of strength.

I don’t believe he really wants to get into a tariff war, but threatening a country’s economy is a great way to get their attention and bring them to the table, and that is exactly what Trump did here.

Trump put the threat out, it was laughed off, then he dropped in the tariffs, and all of a sudden Canada and Mexico want to have a chat about how they can make things better.

In that aspect, Trump’s plan was flawless.

In dropping the tariffs for one month, White House Press Secretary Karoline Leavitt stated, "We spoke with the Big Three auto manufacturers. We are going to give a one-month exemption on any autos coming through USMCA.

"Reciprocal tariffs will still come into effect on 2 April, but at the request of the companies associated with USMCA, the President is granting them an exemption for one month so they are not at an economic disadvantage.”

In July 2020, Trump replaced NAFTA with the United States-Mexico-Canada Agreement (USMCA), which requires 75% of all auto parts be manufactured in North America in order to have zero tariffs on the vehicles. That agreement is up for renegotiation in July 2026.

Trump has already told automobile manufacturers if they want to get an exemption from all tariffs, stop building their cars in other countries and bring manufacturing back to the United States, so that will likely be a consideration when the new deal is negotiated.

I am going to say this one more time because I know people are panicking over this.

Trump came into a very bad situation economically, and it will not be changing anytime soon. It will take a solid six months in office before his policies can impact pricing positively, and it may get worse yet before it gets better.

Trump overpromised, and that is on him, but we need to give him a little time to get his worked out. I think we will be in a much better spot a year from now, but we are still going to have to deal with some financial pains while all this flexing takes place.