U.S. president Donald Trump says he’s considering exempting auto parts from tariffs — at least temporarily.
Just weeks ahead of a May 3 deadline for a 25 per cent tariff on automotive parts, Trump said in an Oval Office press conference that U.S. automakers need more time to sort out their supply chains.
“I’m looking at something to help car companies with it,” Trump said. “They’re switching to parts that were made in Canada, Mexico and other places, and they need a little bit of time, because they’re going to make them here.”
Shares of the Big Three Detroit automakers shot up in the wake of Trump’s statement.
GM shares rose 3.4 per cent on the day, Ford four per cent, and Stellantis 1.9 per cent.
Parts makers also saw their shares rise Monday.
Aurora-based Magna saw its shares rise 1.7 per cent, while Guelph-based Linamar rose one per cent and Vaughan-based Martinrea rose 1.8 per cent.
The head of Canada’s Automotive Parts Manufacturers’ Association said Trump is finally starting to realize a fact of automotive life: The U.S. can’t do it alone.
“There’s a developing understanding from the White House that a parts tariffs will immediately raise the risk of continued auto production in the U.S.,” said APMA CEO Flavio Volpe. “Canadian, Mexican and Chinese parts are organs in the U.S. auto body. It can’t survive without them and tariffs that restrict automakers from acquiring all of them in an inflexible just-in-time business would immediately cause critical harm.”
Still, Volpe said, the North American auto sector is far from out of the woods. The 25 per cent tariff on auto imports is already a killer on its own in such a highly integrated, complex industry, Volpe said.
“If he keeps auto tariffs on and auto parts tariffs off, we’re going to continue to see temporary or rolling or even permanent shutdowns of auto manufacturing capacity in Canada and Mexico,” Volpe argued.
But creating new manufacturing jobs in the U.S. — as Trump says he’s aiming to do — is an expensive pipe dream, Volpe added. Tearing down the existing industry, however? That’s cheap, and easy.
“You can’t set up extra capacity without billions of dollars of expense. But it doesn’t cost you anything to idle capacity. And we’re seeing that,” Volpe said.
On April 3, Trump imposed a 25 per cent tariff on all cars and light trucks imported to the U.S. He also announced imported automotive parts would face a tariff no later than May 3.
American officials have said there will be a partial exemption for cars made with parts from the U.S., although it’s still not entirely clear how that will work.
Canada retaliated in kind, with a 25 per cent tariff on American-made cars imported to Canada.
Cars with less than 75 per cent North American content will get hit with the full 25 per cent tariff by Canada. Cars with at least 75 per cent North American content — making them CUSMA-compliant — will only face the tariff on content not coming from Canada or Mexico.
For weeks, auto industry insiders have predicted that tariffs could mean most of North America’s highly integrated auto sector could grind to a halt.
Some raw materials cross the border seven or eight times en route to becoming a finished vehicle rolling off an assembly line.
Already, Stellantis has paused production at its Windsor assembly plant for two weeks, citing tariffs. Stellantis’s move led to the temporary layoff of thousands of workers on both sides of the border, including in parts manufacturing plants.
Friday, GM also announced it was temporarily closing the CAMI plant in Ingersoll, Ont. for several months, and will be limiting production when it reopens.
The North American automotive industry has also faced a hit from a 25 per cent tariff on all steel and aluminum imports to the U.S.
