U.S. President Donald Trump announced a temporary exemption for car manufacturers from the newly imposed 25% import tax on vehicles from Canada and Mexico. The decision came just a day after the tariffs took effect.

Despite this relief, Trump continued to criticize Canada, arguing that the country had not done enough to curb the flow of drugs into the U.S. Following a phone call with Canadian Prime Minister Justin Trudeau, Trump expressed his skepticism on social media, stating, "Nothing has convinced me that it has stopped."

The exemption boosted U.S. stock markets, which had been struggling for two days. The S&P 500 rebounded as investors reacted positively to the announcement. The tariff exemption applies to North American-made vehicles that meet the existing free trade agreement’s requirements, which outline the percentage of a car that must be produced within each country to qualify for duty-free treatment.

White House Press Secretary Karoline Leavitt revealed that Trump granted a one-month reprieve after appeals from major automakers, including Ford, General Motors, and Stellantis, whose supply chains are deeply integrated across North America. Analysts at S&P Global Mobility had warned that the new tariffs could have disrupted one-third of North American car production within a week.

Following the announcement, Ford’s stock rose by more than 5%, General Motors’ by over 7%, and Stellantis’ by more than 9%. Leavitt noted that Trump remained open to considering additional exemptions, stating, "He always has open dialogue and he'll always do what he believes is right for the American people."

Trade between the U.S., Canada, and Mexico amounts to billions of dollars daily, and the three economies are closely intertwined. The Canadian Chamber of Commerce warned that while the temporary exemption provided some relief, it would still harm affordability and business relationships. Matthew Holmes, the organization’s chief public policy officer, criticized Trump’s approach: "We've seen this movie before. President Trump imposes tariffs and then grants exemptions one by one. That’s not how a lasting trade partnership is built."

Ontario Premier Doug Ford dismissed the temporary relief, stating that it would not change his plans for retaliation. In response to U.S. tariffs, Ontario had already halted sales of American liquor.

Trump's aggressive trade policies, including threats of "reciprocal" tariffs against various nations, have fueled concerns about a broader trade war. On Tuesday, he expanded tariffs to Chinese goods, raising duties to at least 20%, prompting China to retaliate against U.S. exports, particularly agricultural products.

Canada and Mexico also responded with countermeasures. Canada imposed retaliatory tariffs on U.S. goods, including peanut butter, oranges, and wine. Mexico vowed to implement similar trade restrictions.

The escalating trade tensions have left businesses and farmers uncertain about the future. Bob Hemesath, board president of Farmers for Free Trade, voiced his concerns: "I don’t know where this is going or how it ends. I just hope it ends quickly."

Major U.S. retailers have warned that consumers will see higher prices on products like avocados within days, while economists predict that the tariffs could trigger recessions in Canada and Mexico. Trump acknowledged that his policies might cause short-term economic pain but insisted that they were necessary to protect U.S. industries and manufacturing.

He justified the tariffs on Canada, Mexico, and China by linking them to illegal immigration and drug trafficking. Writing on social media, Trump claimed he had pressed Trudeau on the issue, saying, "He said that it's gotten better, but I said, 'That's not good enough.'" Trudeau dismissed Trump's allegations as a "completely bogus" justification for tariffs, pointing out that less than 50 pounds of fentanyl were seized at the U.S.-Canada border last year.

Despite the temporary reprieve for car manufacturers, White House officials confirmed that Trump still plans to move forward with additional reciprocal tariffs on April 2. Commerce Secretary Howard Lutnick stated, "There are going to be tariffs—let’s be clear. But what he’s considering now is which sectors might receive temporary relief until April 2."