US President Donald Trump said he would temporarily spare carmakers from a new 25% import tax imposed on Canada and Mexico, just a day after the tariffs came into effect.
The announcement by the White House came even as Trump continued to blast Canada for not doing enough to stop drugs from entering the US.
“Nothing has convinced me that it has stopped,” Trump wrote on social media after a phone call with Canadian Prime Minister Justin Trudeau about the economic disruption caused by new trade tariffs.
News of the relief helped to boost US shares, after two days of declines that wiped out gains the S&P 500 had seen since the presidential election in November.
The tariff exemption is for cars made in North America that comply with the continent’s existing free trade agreement.
That deal, which was negotiated by Trump during his first term, sets out rules for how much of a car must be made in each country to qualify for duty-free treatment.
White House press secretary Karoline Leavitt said Trump had backed a one-month exemption to the tariffs for the car industry after pleas from Ford, General Motors and Stellantis, which have supply chains that stretch across North America.
Shares in Ford were up by more than 5% after the announcement, while General Motors shares rose more than 7%.
“The president is open to hearing about additional exemptions,” Ms Leavitt added.
“He always has open dialogue and he’ll always do what he believes is right for the American people.”
Goods worth billions cross the borders of the US, Canada and Mexico each day and their economies are deeply integrated.
Trump’s moves, and his threats to impose “reciprocal” tariffs on countries around the world, have raised fears of a wider trade war.
Canada and Mexico responded with their own retaliatory import levies on US goods after Washington’s 25% tariffs on its two neighbours came into effect on Tuesday.
The new tariffs – which are a tax applied as goods enter the country – were poised to disrupt a third of car production in North America within a week, according to analysts at S&P Global Mobility.
Big retailers in the US had also warned the measures will lead to higher prices on goods such as avocados within days, while economists were forecasting economic recessions in Mexico and Canada triggered by the tariffs.
Trump has acknowledged his moves may lead to short-term economic pain in the US, but said he wants to protect US industry and boost manufacturing.
He has cast the tariffs this week against goods from America’s two neighbours, as well as China, as a response to the flow of migrants and fentanyl across the border.
Writing on social media on Wednesday, Trump said he had told Trudeau that the situation was not improving.
“He said that it’s gotten better, but I said, ‘That’s not good enough’,” Trump said.
Trudeau has called Trump’s claims about drugs a “completely bogus” justification for tariffs on his country.
The US seized less than 50 pounds of fentanyl at its northern border last year.
White House officials have said Trump still intends to move ahead on 2 April with plans for reciprocal tariffs on other countries around the world that he sees as treating the US unfairly.
“There are going to be tariffs – let’s be clear – but what he’s thinking about is which sections of the market that maybe he’ll consider giving them relief until we get to, of course, April 2,” Commerce Secretary Howard Lutnick told Bloomberg earlier on Wednesday.
“It will be 25% but there will be some categories left out – it could well be autos. It could be others as well,” he added.
A day earlier on Fox News, Lutnick had raised the possibility of a compromise and reduction of tariffs for Mexico and Canada, saying Trump was weighing offers to meet his neighbours “in the middle”.
