Automobile components from Canada adhering to CUSMA (Trade Agreement among Canada, the United States, and Mexico) will be exempt from Trump's tariffs.

The Latest on CUSMA-Compliant Auto Parts:

It's the good news the beleaguered North American automobile industry has been waiting for. On Thursday, U.S. Customs and Border Protection announced that automobile parts in line with the Canada-U.S.-Mexico Agreement (CUSMA) will evade President Trump's tariffs.

This latest move signifies some much-needed relief for the intertwined North American automotive sector, which has been battling numerous layers of tariffs.

Trump imposed a 25% tariff on all imported vehicles to the U.S. last month. However, he made an exception for American-made parts that adhere to the CUSMA standards, another name for the continental trade pact.

The White House initially hinted at a similar scheme for compliant CUSMA auto part imports before the duties were set to go into effect on May 3. Industry experts and stakeholders had expressed concerns about the feasibility and complexity of distinguishing between non-American components and American components in auto parts, considering they frequently cross the border between Canada and the U.S. multiple times before the final product is complete.

U.S. Customs and Border Protection clarified on Thursday that the exemption does not apply to automobile knock-down kits or parts compilations.

Notable players like Ford, General Motors, and Stellantis have been advocating for this concession, vocalizing concerns that the tariffs would drive up costs and potentially cripple the North American industry. General Motors CEO Mary Barra predicted that the tariffs could cost her company up to $5 billion.

Trump granted the auto industry a brief reprieve on Tuesday, stating, "I just want to help them endure this little transition, short term." He signed an executive order ensuring that companies bearing the automobile tariffs would not see other levies, like the 25% duties on steel and aluminum, stacked on top of each other.

Trump also signed another executive order offering automakers that assemble their vehicles in the U.S. a rebate on imported auto parts, equating to 15% of a vehicle’s retail price. The rebate would decrease to 10% the following year.

Despite the ambiguity regarding CUSMA-compliant parts, a White House fact sheet suggests these components will receive some sort of relief.

Flavio Volpe, president of the Automotive Parts Manufacturers' Association in Canada, commented, "The industry has been warning, I've been warning, for three months that tariffs on auto parts would shut down manufacturing."

The auto industry's powerful U.S. lobbying groups warned the Trump administration last week about the potential damage auto part tariffs would cause to supply chains and prices. They stated grimly, "many are already in distress and will face production stoppages, layoffs, and bankruptcy."

Volpe claimed that the current tariff situation represents a significant political risk for the Trump administration, stating, "to bet against the industry that it would shut itself down would be one heck of a political risk to take."

Trump has insisted that his tariffs will bring auto manufacturing back to the U.S., but the Canadian industry has been thriving since the early 1900s. Canada and the U.S. integrated the sector through the 1965 Auto Pact trade deal, and CUSMA, negotiated during the first Trump administration, offered increased support for the North American automobile industry.

Volpe acknowledges that the change for CUSMA-compliant parts is a "recognition that there was something to that argument that it was a terrible risk" to impose immediate job losses in the automobile sector.

"You can spin anything you want in this era of long lag times of macroeconomic effect, but you can't spin people being at home," he said.

Stellantis confirmed on Thursday that it will close its Windsor, Ont. auto assembly plant for a week starting May 5, citing preparations for the upcoming launch of the 2026 model year vehicles. The company insisted that it "will continue to monitor the situation."

This report was first published May 1, 2025, by The Canadian Press

The decision by U.S. Customs and Border Protection to exempt CUSMA-compliant auto parts from tariffs provides much-needed relief for the North American automotive sector.
Concerns about the feasibility and complexity of distinguishing between American and non-American components in CUSMA auto parts were raised by industry experts and stakeholders.
Ford, General Motors, and Stellantis were vocal advocates for the tariff exemption, expressing fears that the tariffs could drive up costs and potentially cripple the North American industry.
Despite the ambiguity, a White House fact sheet suggests that CUSMA-compliant parts will receive some form of relief.