President Donald Trump has delayed tariffs on automobile imports from Canada and Mexico for one month after requests from executives at the Big Three automakers — General Motors, Ford, and Stellantis. The reprieve comes less than two days after Trump issued 25% tariffs on all goods from the U.S.’s neighbors, which had previously been duty-free under a North American trade agreement.

The automakers have complex supply chains and operate several manufacturing facilities in Mexico and Canada. For example, GM produces its Chevy Equinox in Mexico and Canada, and both Ford’s Lincoln Nautilus SUVs and Stellantis’s Dodge Chargers are made in Ontario. Multiple automotive suppliers also have factories in the two countries.

Car prices are already at historic highs, and the tariffs threaten to send sticker prices skyrocketing by as much as $12,000, according to Jeff Schott, senior fellow at the Peterson Institute for International Economics. That could lead to less demand, leaving dealers stuck with unaffordable cars on their lots.

In an address to Congress on Tuesday, Trump urged manufacturers to move their operations to the United States. Ford CEO Jim Farley said last month at an investor talk the company doesn’t have excess capacity at its plants to shift production. Farley noted that Ford could withstand tariffs in the short term, but if they persisted, they “would blow a hole in the U.S. industry that we’ve never seen.”

Impact on the Automotive Industry

Through February, nearly half of all new vehicles sold in the U.S. were built in the U.S., but 17.4% of them were built in Mexico, and 7.4% in Canada, according to data from Edmunds.com. The delay in tariffs provides temporary relief to the automakers, but the long-term impact of the tariffs on the industry remains uncertain.

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