Donald Trump grants 1-month exemption for U.S. automakers from new tariffs on imports from Mexico, Canada

President Donald Trump is granting a one-month exemption on his stiff new tariffs on imports from Mexico and Canada for U.S. automakers, amid fears that the trade war could harm U.S. manufacturers.

The announcement comes after Trump spoke with leaders of the “big 3” automakers, Ford, General Motors, and Stellantis on Wednesday.

“We spoke with the big three auto dealers,” Trump said in a statement read by his spokesperson. “We are going to give a one month exemption on any autos coming through USMCA,” referencing the North American free trade agreement he renegotiated in his first term.

Commerce Secretary Howard Lutnick had said there might be carveouts coming to the 25% tariffs placed on Canada and Mexico by Trump, a softening of the U.S. position after Tuesday’s tax hike hurt the stock market, worried consumers and started a trade war.

But, Trump’s tariffs have stirred up bad blood among allies who see his aggression on trade as misguided, leading Canada to suggest it will reject any offer to water down the day-old tariffs. Nor is the trade war necessarily a brief skirmish as the White House maintains that even harsher taxes on imports are coming in April, even as businesses and consumers worry that the cost of paying the taxes will crush economic growth, worsen inflation and cause layoffs.

Still, the administration is grappling with the fallout of tariffs beloved by Trump that could create serious blowback for his political mandate to lower prices. The president has recognized that his tariffs could cause some financial pain, yet he has repeatedly tried to suggest the tariffs will lead to more domestic investment and factory work.

In a Wednesday interview with Bloomberg Television, Lutnick said that Trump would update his tariff plans with an afternoon announcement, possibly sparing sectors such as autos from the import taxes.

“There are going to be tariffs, let’s be clear,” Lutnick said. “But what he’s thinking about is which sections of the market that can maybe — maybe — he’ll consider giving them relief until we get to, of course, April 2.”

Canadian Prime Minister Justin Trudeau is not willing to lift Canada’s retaliatory tariffs if Trump leaves any tariffs on Canada, a senior government official told The Associated Press. The official confirmed the stance on condition of anonymity as they were not authorized to speak publicly on the matter.

Other Canadian officials are publicly echoing this sentiment.

“We’re not interested in meeting in the middle and having some reduced tariff. Canada wants the tariffs removed,” Canadian Finance Minister Dominic LeBlanc told the Canadian Broadcasting Corporation.

Lutnick said he would talk on Wednesday morning with Trump about the possible options regarding Canada and Mexico, saying that both countries are working to address the U.S. President’s concerns about drug trafficking. Lutnick said to expect Trump to announce his decision Wednesday afternoon.

On Tuesday, Trump put 25% taxes on imports from Mexico and Canada, taxing Canadian energy products such as oil and electricity at a lower 10% rate. The president also doubled the 10% tariff he placed on China to 20%. The administration has said the tariffs are about stopping the smuggling of drugs such as fentanyl, but Trump also suggested that the tariffs are about getting rid of persistent U.S. trade deficits.

The taxes almost immediately triggered retaliatory measures by Canada and China, with Mexico planning to announce its response on Sunday. The U.S. stock market has given up all of the gains since Trump’s victory in last year’s presidential election and consumers are already exhausted by inflation and worried the costs of the tax hike would lead to higher prices. Those concerns may have prompted Lutnick to signal a possible retreat in a Tuesday afternoon interview with the Fox Business Network.