WASHINGTON (Reuters) — President Donald Trump’s administration is considering granting relief from his 25% tariffs on Canadian and Mexican imports for products that comply with an existing trade pact he negotiated with the two US neighbors during his first term, Commerce Secretary Howard Lutnick said on Tuesday.
Lutnick, in an interview on Fox Business, said Trump was looking at the 2020 US-Mexico-Canada Agreement as a way to meet Canada and Mexico “in the middle some way.”
“The president is considering giving you relief, if you live under those rules. And if you haven’t lived under those rules, well, then you have got to pay the tariff,” Lutnick said.
He said a potential arrangement could be announced on Wednesday, but added that Canada and Mexico “have got to do more” to end fentanyl overdose deaths in the United States, the rationale Trump has used for the tariffs.
Two sources familiar with the discussions between the Trump administration and Canadian and Mexican officials said the talks are aimed at exemptions for companies that comply with the USMCA’s rules of origin. Those exemptions are largely, but not exclusively, aimed at automakers.
Two automaker sources said one scenario would call for a 30-day exemption from the tariffs, but automakers would have to demonstrate plans to invest more in US auto production to remain exempt.
Details of potential changes to the tariffs that took effect on Tuesday are far from agreed, the sources said. Trump will decide on any final deal, and since taking office, he has chosen to impose tariffs when given the option to back off.
The 25% levies on Mexican and Canadian goods create particular problems for automakers, who face massive cost increases for parts and vehicles produced in Mexico and Canada bound for the U.S. market.
An exemption from tariffs for cars and trucks that comply with USMCA’s complex North American content rules for duty-free access to the U.S. market would be a boon for Detroit automakers Ford (F), GM (GM) and Stellantis (STLA).
It also would benefit some foreign brand automakers with large U.S. production footprints, including Honda and Toyota, while forcing some competitors assembling cars in Mexico to pay the full 25% U.S. tariffs.
The deal under consideration would also eliminate the 10% tariff on Canadian energy imports, such as crude oil and gasoline, which comply with the USMCA rules of origin, one of the sources familiar with the talks said.
Speaking to reporters after Trump’s address to Congress at the U.S. Capitol, Lutnick said he thought there would be “some movement” on tariffs on Wednesday.
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