*

Exemption will benefit Detroit automakers

*

Trump open to exemptions for other products

*

Trump says Trudeau call ended in 'somewhat' friendly

manner

(Adds quotes from agricultural secretary on possible

exemptions, criticism from Canadian foreign minister, statement

from automaker council, paragraphs 10-11, 17, 27)

By David Lawder, David Shepardson and David Ljunggren

WASHINGTON/OTTAWA, March 5 (Reuters) - U.S. President

Donald Trump will exempt automakers from his punishing 25%

tariffs on Canada and Mexico for one month as long as they

comply with existing free trade rules, the White House said on

Wednesday, a development that halted at least for now Wall

Street's steepest skid in nearly three months.

Trump is also open to hearing about other products that

should be exempted from the tariffs, which took effect Tuesday,

the White House said.

But Trump made clear he was not calling off his trade war

with Canada and Mexico as he pressures both countries to deter

fentanyl smuggling. After a phone call with Canadian Prime

Minister Justin Trudeau, Trump said he was not convinced the

situation had improved.

"He said that it's gotten better, but I said, 'That's not

good enough,'" Trump wrote on his Truth Social platform. "The

call ended in a 'somewhat' friendly manner!" Trudeau's office

said discussions would continue. Official statistics show a

small fraction of fentanyl in the U.S. comes across the Canadian

border.

The one-month reprieve sparked a rebound in auto stocks, but

trade tensions have created uncertainty for U.S. corporations

and sapped consumer confidence, leading to a selloff in stocks

in recent days.

General Motors ( GM ) shares were up 7.2% and Ford

gained 5.8% on Wednesday, but both shares are still down on the

year.

Trump's tariffs pose extreme difficulties for automakers,

which produce vehicles in all three countries and often ship

parts across North American borders multiple times as they get

built into systems and finished vehicles.

A one-month exemption for cars and trucks that comply with

the U.S.-Mexico-Canada Agreement's complex content rules, as

Trump has outlined, would be a boon for Ford, GM and Stellantis ( STLA )

.

Trump also might eliminate the 10% tariff on Canadian energy

imports, such as crude oil and gasoline, that comply with the

USMCA rules of origin, a source familiar with the discussions

said.

Agriculture Secretary Brooke Rollins told Bloomberg the

administration might consider removing tariffs from specific

agricultural products and that "everything is on the table."

"As far as specific exemptions and carveouts for the

agriculture industry, perhaps for potash and fertilizer, et

cetera - to be determined," she said, according to Bloomberg.

Trump's tariffs have damaged relations between the three

trading partners. Canada has hit back with tariffs of its own on

selected U.S. imports, while Mexico has vowed to retaliate as

well.

Fentanyl is responsible for most drug overdose deaths in the

U.S., which have exceeded 100,000 annually in recent years. U.S.

officials say Canada and Mexico are conduits for shipments of

the drug and its precursor chemicals into the U.S. in small

packages that are not often inspected by customs agents.

Public data shows 0.2% of all fentanyl seized in the U.S.

comes from across the Canadian border, while the vast majority

originates from the southern border. U.S. officials seized

roughly one third of an ounce along the Canadian border in

January, down from 5.5 pounds in November.

The tariffs threaten to derail Canada's fledgling economic

recovery and could trigger a recession. The country relies on

the United States for 75% of its exports and a third of all

imports, and Canadian officials have pledged to fight back hard

if necessary.

Canada could potentially use oil and gas exports as a lever

in negotiations if U.S. tariffs on Canadian imports escalate,

Foreign Minister Melanie Joly told a Toronto business audience

on Wednesday.

"There's too much unpredictability and chaos coming out of

the White House right now," Joly told reporters, adding that

Canada could not "go through this psychodrama every 30 days."

Trade tensions already may be hurting the U.S. New data on

Wednesday showed slowing payroll growth as well as lower wage

growth for workers who switch jobs, while a separate Federal

Reserve report found widespread uncertainty among U.S.

businesses about Trump's policies. The Fed's "Beige Book" report

showed some businesses were not waiting for tariffs to take

effect to raise their prices.

The dollar hit three-month lows on Wednesday, while U.S.

stock indices, which had fallen steadily this week, found at

least a temporary footing. The benchmark S&P 500 index rose

1.1%, retracing about a third of its decline from the previous

two days.

Trump has also imposed an extra 10% duty on Chinese goods,

and China has responded with additional tariffs of its own.

BOON FOR DETROIT

The tariffs could spell trouble for Detroit's big money

maker - pickup trucks - barring a long-term deal.

One analysis suggested the levies would have added an

average of $3,000 to vehicles and up to $7,000 on nameplates

coming from Mexican and Canadian plants. That would be a blow to

buyers who, according to an Edmunds survey, typically lean

Republican.

Trump's announcement came one day after a phone call with

the CEOs of Ford, GM and Stellantis ( STLA ).

Vehicles made by the three companies comply with the USMCA's

complex rules that require 75% North American content in order

to get duty-free access to the U.S. market.

The rules also require 40% of a passenger car's content to

be manufactured in the United States or Canada, based on a list

of "core parts" including engines, transmissions, body panels

and chassis components. The threshold for pickup trucks is 45%.

"American Automakers Ford, GM and Stellantis ( STLA ) applaud

President Trump for recognizing that vehicles and parts that

meet the high U.S. and regional USMCA content requirements

should be exempt from these tariffs," said Matt Blunt, president

of the American Automotive Policy Council, which represents the

three companies.

Automakers support boosting U.S. investment but want

certainty over tariff policies and vehicle emissions rules

before making dramatic changes, two industry sources said.

An exemption also would benefit some foreign brand

automakers with large U.S. production footprints, including

Honda ( HMC ) and Toyota ( TM ), but some competitors that

don't comply would have to pay the full 25% U.S. tariffs.