Investing.com -- Shares of General Motors (NYSE: GM ) and Ford Motor (NYSE: F ) moved higher in early Wednesday trading, rising 4% and 2.4% respectively, following news that President Donald Trump could roll back tariffs on Canada and Mexico. The automotive sector, which had been under pressure due to the recent imposition of tariffs, saw a rebound amid expectations of a compromise that could alleviate trade tensions.

Commerce Secretary Howard Lutnick indicated late Tuesday that Trump is likely to announce tariff compromises with Canada and Mexico, possibly as early as Wednesday. This development comes on the heels of Trump’s proposal during his address to Congress Tuesday night, suggesting the introduction of tax deductibility for interest payments on auto loans for vehicles manufactured in the U.S.

The automotive industry experienced a downturn following the implementation of tariffs on Tuesday, which had sent many auto manufacturer stocks lower. However, the potential rollback and the President’s push to incentivize the purchase of American-made vehicles have provided a boost to the sector.

In his address, President Trump stated, "I also want to make interest payments on car loans tax deductible, but only if the car is made in America. We’re going to have growth in the auto industry nobody has ever seen." This proposal, which echoes sentiments from his late 2024 campaign stops, aims to spur domestic production and sales.

While no specific analyst quotes were provided, the market response suggests optimism surrounding the proposed changes and their potential impact on the U.S. auto industry. Investors appear to be reacting to the immediate alleviation of tariff concerns, as well as the longer-term implications of Trump’s tax incentive proposal.

The automotive sector’s performance today contrasts with the recent slump, highlighting how policy changes and government incentives can significantly sway investor sentiment. As the market awaits further details on the tariff compromises and the potential for tax-deductible auto loan interest, shares of General Motors and Ford Motor have shown resilience, reflecting the market’s adaptive response to the evolving trade and policy landscape.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.