Canadian auto parts traded under North American free trade rules will be exempted from U.S. President Donald Trump’s 25 per cent auto tariffs due to start Saturday, according to new U.S. guidance.
The bulletin from U.S. Customs and Border Protection (CBP), issued to American importers Thursday, says auto parts that are eligible for preferential treatment under the Canada-United States-Mexico Agreement (CUSMA) on free trade will be subject to a zero per cent tariff, “other than automobile knock-down kits or parts compilations.”
All other parts, as well as non-U.S. parts in passenger vehicles completed outside the U.S., will still be subjected to a 25 per cent tariff starting at 12:01 a.m. Eastern on May 3, the bulletin says.
The guidance appears to confirm language in Trump’s April executive order that said the 25 per cent tariff would not apply to CUSMA-compliant auto parts, and directed his administration to set up a process for that exemption.
All CUSMA-compliant goods were already exempted from Trump’s sweeping tariffs on Canada that were imposed in March in relation to fentanyl concerns.
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Canada’s trade commissioner service on Wednesday released new guidance and information for Canadian exporters to understand CUSMA compliance, as well as resources for “problem solving related to tariffs.”
Canada has retaliated against Trump’s auto tariffs by matching them on American-built vehicles and U.S. parts in vehicles finished in Canada under CUSMA.
The tariffs have roiled the North American auto industry, with companies and independent analysts warning of higher prices and reduced sales.
Stellantis said Thursday it will shut down production at its Windsor, Ont., assembly plant for a week, which comes on the heels of a two-week closure in April.
General Motors said Thursday while releasing its first-quarter financials it expects tariffs to inflict between US$4 billion and US$5 billion in damage to its revenue for the year.
An analysis released Thursday by Michigan-based Anderson Economic Group said automakers will face a US$2,000 to US$12,000 tariff impact per vehicle, even after Trump on Tuesday signed new executive orders to relax some of his tariffs.
Trump and White House officials said the move was meant to give automakers relief and time to move their production to the U.S.
“We just wanted to help them endure this little transition, short term … If they can’t get parts, you know it has to do with a very small percentage, if they can’t get parts we didn’t want to penalize them,” Trump told reporters at the White House.
Under the orders, the administration will offer automakers that finish their vehicles in the U.S. a rebate on imported auto parts that is equal to 15 per cent of a vehicle’s retail price. The rebate would drop to 10 per cent the following year.
Trump’s new orders also say companies paying the automobile tariffs won’t see some other levies — including 25 per cent tariffs on steel and aluminum — stacked on top of each other.
While automakers praised the changes, Candace Laing, president and CEO of the Canadian Chamber of Commerce, said the ongoing inconsistency of Trump’s tariffs is driving away investment and business in Canada and the U.S.
Only an end to tariffs will provide real relief, she said.
“North American autoworkers, plants and investors can’t predict how the U.S. administration will wake up and feel on any given morning,” Laing said in a statement.
“Business plans are delayed. Pricing pressure is rising.”
— with files from the Canadian Press
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