Donald Trump is to exclude carmakers across North America from the pain of US tariffs levelled against Mexico and Canada, following apparent pressure from motor bosses.

The White House confirmed the concession was made after the president spoke to the bosses of Ford, General Motors and Stellantis in a call on Wednesday.

Each company has manufacturing operations and suppliers in Canada and Mexico.

There will be a tariff exemption of at least a month on vehicles made across the continent but only if a previous agreement on so-called ‘rules of origin’ is implemented in full.

It governs where a product is first sourced and where a tariff may apply during transit across borders.

“Reciprocal” tariffs are still planned from April, the president’s spokesman said.

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Manufacturers have complained of being worst affected by the imposition of 25% tariffs against both Canada and Mexico since Tuesday because flows of parts between the three countries can be hit by tariffs multiple times.

The complicated nature of their operations can mean a single component crosses a border more than once during the production process.

Such a big spike in costs from tariffs poses a big risk to sales as customers are asked to pay more to help compensate for the sanctions.

Automakers’ share prices have been among the worst hit since Mr Trump took office again in January.

The car bosses, according to Reuters news agency sources, pledged additional US investment but wanted clarity on tariffs ahead.

Mr Trump urged them to shift their operations to the United States, according to a White House statement.

The tariff concession marked the first compromise on the trade issue since the president signalled, on Tuesday, that there would be no U-turns and only more tariffs after Canada said it would respond in kind.

There have been growing signs this week that corporate America is uneasy, at best, with the tariff policy against both Mexico and Canada

Those US neighbours, along with China, which is facing 20% tariffs, are the country’s three biggest trading partners.

The imposition of tariffs on all goods has been received badly by financial market investors, worried that US profitability is at risk.

One closely-watched forecast for US growth suggested that the threat of tariffs since Mr Trump’s election victory was confirmed had hammered activity and plunged the country into recession.

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There are mounting reports of boycotts against US goods in Mexico and Canada.

The nerves were publicly admitted by the boss of Jack Daniel’s maker Brown Forman, Lawson Whiting, on Wednesday when he described Canadian provinces taking American-made alcohol off shop shelves as “worse than a tariff”.

US stock market values are sharply down since the inauguration and the dollar has lost more than three cents against rivals including the euro and the pound just this week amid the tariff turmoil.

Such is the growing investor concern for the health of the US economy, the tariff implications have been partly blamed for a steep fall in oil prices.

Brent crude was trading at $68 a barrel earlier on Wednesday – its lowest level for more than three years.

Donald Trump’s 25% tariffs on goods from Mexico and Canada have come into effect, as has an additional 10% on Chinese products, bringing the total import tax to 20%.

The US president confirmed the tariffs in a speech at the White House – and his announcement sent US and European stocks down sharply.

The tariffs will be felt heavily by US companies which have factories in Canada and Mexico, such as carmakers.

Mr Trump said: “They’re going to have a tariff. So what they have to do is build their car plants, frankly, and other things in the United States, in which case they have no tariffs.”

There’s “no room left” for a deal that would see the tariffs shelved if fentanyl flowing into the US is curbed by its neighbours, he added.

Mexico and Canada face tariffs of 25%, with 10% for Canadian energy, the Trump administration confirmed.

And tariffs on Chinese imports have doubled, raising them from 10% to 20%.

Canada announced it would retaliate immediately, imposing 25% tariffs on US imports worth C$30bn (£16.3bn). It added the tariffs would be extended in 21 days to cover more US goods entering the country if the US did not lift its sanctions against Canada.

China also vowed to retaliate and reiterated its stance that the Trump administration was trying to “shift the blame” and
“bully” Beijing over fentanyl flows.

Mr Trump’s speech stoked fears of a trade war in North America, prompting a financial market sell-off.

Stock market indexes the Dow Jones Industrial Average and the Nasdaq Composite fell by 1.48% and 2.64% respectively on Monday.

The share prices for automobile companies including General Motors, which has significant truck production in Mexico, Automaker and Ford also fell.

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The losses continued on Monday. Asian markets closed down, and European markets opened lower.

The pan-European Stoxx 600 dropped 1.07% while the biggest indexes in major European economies fell sharply.

Consumers in the US could see price hikes within days, an expert said.

Gustavo Flores-Macias, a public policy professor at Cornell University, New York, said “the automobile sector, in particular, is likely to see considerable negative consequences”.

This is due to supply chains that “crisscross the three countries in the manufacturing process” and ” because of the expected increase in the price of vehicles, which can dampen demand,” he added.

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The Trump administration is gearing up to bring in other tariffs in the coming weeks.

On 2 April, reciprocal tariffs will take effect on all countries that impose duties on US products.

He is also considering 25% tariffs on goods from the EU “very soon” after claiming the bloc was created to “screw the United States”.

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The second-time president claims the tariffs – taxes on goods imported into the US – will help reduce illegal migration and the smuggling of the synthetic opioid fentanyl to the US.

In a White House speech on Monday, Mr Trump confirmed 25% tariffs on goods from Mexico and Canada and the doubling of tariffs on Chinese imports – from 10% to 20%. Canadian energy will be levied at 10%, he added.

China responded immediately, with 15% taxes on food and agricultural products it sends to the US – worth around $21bn (£16.5bn).

Canadian Prime Minister Justin Trudeau also retaliated with extra tariffs worth $100bn (£78.7bn) over the next 21 days. Mexico has not yet announced any countermeasures.

Both Mexican President Claudia Sheinbaum and Mr Trudeau have promised extra troops at their US borders to combat illegal migration, in a bid to stop an all-out trade war with Mr Trump.

But he appears determined to go even further, targeting other countries, including those in the European Union, which he claims was created to “screw” the US.

Will Trump target UK with tariffs?

No new US tariffs have been announced on the UK.

And Prime Minister Sir Keir Starmer’s successful White House visit raised hopes Britain could avoid Mr Trump’s recent wave of them.

“I think there’s a very good chance that in the case of these two great, friendly countries, I think we could very well end up with a real trade deal where the tariffs wouldn’t be necessary. We’ll see,” the president told reporters afterwards.

Mr Trump is largely concerned with trade deficits – when you import more goods from another country than you send there in return.

The US does not have a trade deficit with Britain – so UK ministers have previously suggested this could be good news for avoiding new levies.

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But even if no tariffs are put on UK exports, consumers will still be impacted by the wider trade war.

Mr Trump’s Monday announcement sparked an immediate downturn in US and European stocks, with share prices for car manufacturers, including General Motors, which produces a lot of its trucks in Mexico, falling in particular.

Economists believe that tariffs will raise costs in the US, sparking a wave of inflation that will keep interest rates higher for longer. The US central bank, the Federal Reserve, is mandated to act to bring inflation down.

More expensive borrowing and costlier goods and services could bring about an economic downturn in the US, the world’s largest economy – and global movements could hit the UK.

Forecasts from the National Institute of Economic and Social Research (NIESR) predict lower UK economic growth due to higher global interest rates.

It estimates UK GDP (a measure of everything produced in the economy) could be between 2.5% and 3% lower over five years and 0.7% lower this year.

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Some economists argue, though, that the UK might not be hurt too badly – even if Mr Trump imposes tariffs on British goods.

The UK doesn’t send a lot of goods to the US, exporting its banking and consulting services to them instead, which do not tend to be subject to tariffs.

However, the Centre for Inclusive Trade Policy thinktank said a 20% across-the-board tariff, impacting the UK, could lead to a £22bn reduction in exports in the UK’s US exports, with the hardest-hit sectors including fishing and mining.

How will it impact US consumers?

Although the Trump administration said the 10% Canadian energy tariff will boost domestic energy production, there are likely to be wide-ranging negative consequences for the US consumer.

Economists argue supply chains will be disrupted and businesses will suffer increased costs – leading to an overall rise in prices.

Both Mexico and Canada rely heavily on their imports and exports, which make up around 70% of their Gross Domestic Products (GDPs), putting them at even greater risk from the new tariffs.

China only relies on trade for 37% of its economy, having made a concerted effort to ramp up domestic production, making it relatively less vulnerable.

Avocados – and other fruit and veg

The US imports between half and 60% of its fresh produce from Mexico – and 80% of its avocados, according to figures from the US Department of Agriculture.

Canada also supplies a lot of the US’s fruit and vegetables, which are mainly grown in greenhouses on the other side of the US border.

This means new tariffs will quickly be passed on to consumers in the form of higher prices.

The US still grows a considerable amount of its own produce, however, so the changes could boost domestic production.

But economists warn an overreliance on domestic goods will see those suppliers increase their prices too.

Petrol and oil prices

Oil and gas prices are likely to be impacted – as Canada provides around 60% of US crude oil imports and Mexico roughly 10%.

According to the US Energy Information Administration, the US received around 4.6 million barrels of oil a day from Canada last year – and 563,000 from Mexico.

Most US oil refineries are designed specifically to process Canadian products, which would make changing supply sources complex and costly.

Oil tariffs could see an increase in fuel prices of up to 50 cents (40p) a gallon, economists have predicted.

Cars and vehicle parts

The US car industry is a delicate mix of foreign and domestic manufacturers.

The supply chain is so complex that car parts and half-finished vehicles can sometimes cross the US-Mexico border several times before they are ready for the showroom.

If this continues, the parts will be taxed every time they move countries, which will lead to an even bigger increase in prices.

As a result, Gustavo Flores-Macias, public policy professor at Cornell University, says “the automobile sector, in particular, is likely to see considerable negative consequences”.

To mitigate this, General Motors has said it will try to rush through Mexican and Canadian exports – while brainstorming how to relocate manufacturing to the US.

Mr Trump said of this dilemma on Monday: “They’re going to have a tariff. So what they have to do is build their car plants, frankly, and other things in the United States, in which case they have no tariffs.”

Electronic goods

When Mr Trump imposed a 50% tariff on imported washing machines during his first term in 2018, prices suffered for years afterwards.

China produces a lot of the world’s consumer electronics – and smartphones and computers specifically – so tariffs are likely to have a similar effect on those devices.

The Biden administration tried to legislate to promote domestic production of semiconductors (microchips needed for all smart devices) – but for now, the US is still heavily reliant on China for its personal electronics.

This will mean an increase in prices for electronics consumers globally – unless tech companies can relocate their operations away from Beijing.

Boost for the steel industry

The sector that could actually benefit from the Trump tariffs is the steel and aluminium industry.

It has long been lobbying the US government to impose levies on foreign suppliers – claiming they are dominating the market and leaving domestic factories without enough business and at risk of closure.

Steel imports increasing in price could therefore promote domestic production – and possibly save some of the plants.

But when Mr Trump increased steel tariffs during his first term, prices also increased – which business leaders said forced them to pass on costs and left them struggling to complete construction projects on budget.