Open this photo in gallery: An employee works on the production line at the Martinrea auto parts manufacturing plant, in Woodbridge, Ont., on Feb. 3.Chris Young/The Canadian Press Canadian-made auto parts exported to the United States, which were previously expected to be hit with steep levies this week, will now have a two-year reprieve under revisions to U.S. President Donald Trump’s tariff plans that were announced this week. After lobbying from the powerful U.S. automotive industry, Mr. Trump has dropped plans to impose 25-per-cent tariffs on auto parts imported from Canada and Mexico that are compliant with the content terms in the U.S.-Mexico-Canada Agreement on free trade, according to documents published on U.S. government websites. “This was going to shut down a bunch of [U.S. factories] this weekend,” Flavio Volpe, head of the Automotive Parts Manufacturers’​ Association, said by phone. “What was to be gained from that?” Mr. Volpe, whose group represents 230 parts makers in Canada, has been at the forefront of the battle against auto tariffs, which executives in Canada and the U.S. say will add unaffordable costs and quickly halt American auto production. However, transmissions, camshafts and other components made in Canada and installed in Canadian assembly plants are still hit by tariffs when those vehicles cross the U.S. border. That’s because Canadian-made cars have been subject to 25-per-cent tariffs since April, based on their non-U.S. content. “It is really important that we remove the tariff threat” on the entire sector, Mr. Volpe said. The two-year reprieve appears to be a response to complaints from the U.S. industry that it will take years and billions of dollars to assemble domestic supply lines. As of Saturday, General Motors Co. GM-N, Ford Motor Co. F-N and other companies that assemble vehicles on U.S. soil can continue to import USMCA-compliant parts tariff-free from Canada and Mexico. The companies will pay 25-per-cent tariffs to import the non-USMCA parts, but can seek a rebate from the U.S. government based on the overall share of USMCA-compliant content in the vehicle. This rebate will cover the tariffs on the non-USMCA content, if a certain threshold is reached. The Trump administration has set this target at 85-per-cent USMCA content in the first year. If this target is reached by the automaker, the rebate it receives will be equal to 3.75 per cent of the car’s suggested retail price. Most U.S.-made vehicles have USMCA content of 70 per cent to 80 per cent. “Only automobiles that undergo final assembly in the United States are eligible to be included in this calculation,” says a White House document published this week. This means the carmaker will effectively pay no tariffs at all. If the content falls short, the rebate will be smaller. In Year 2, the target rises to 90-per-cent USMCA content and the rebate falls to 2.5 per cent. There is no rebate mentioned for Year 3 in the presidential proclamation outlining the policy. It is unclear if that means the tariffs will be imposed on Canadian parts at that time. Canadian parts plants – largely based in Ontario – split their shipments evenly between U.S. and Canadian assembly plants, assuming the domestic factories are running at normal capacity. Unifor, which represents thousands of Canadian auto workers, said the revised tariff policy will still cause job losses and disruption in Canada and the U.S. “Rather than ending the unjust tariffs on Canadian goods, the Trump administration has concocted a temporary and convoluted tariff offset scheme designed to shield U.S. plants while continuing to treat Canada as a trade enemy,” the union said in a statement. “This stopgap measure may prevent an immediate collapse of U.S. auto production but still delivers a crushing blow to Canada’s tightly linked supply chain.” GM on Thursday said the revised tariff plan could cost it as much as US$5-billion this year and reduce profit by more than US$3-billion. Before the changes, the U.S. auto industry warned that tariffs will drive up car prices, leading to reduced production and layoffs. Michigan-based Anderson Economic Group said in a research report Thursday that under the new tariff regime, American-assembled car prices in the U.S. will rise by US$2,000 to US$8,000. “The adjustments provide significant and beneficial softening of the cost impact of these tariffs, at least for U.S.-assembled vehicles,” said consultant Patrick Anderson. “However, the cost is still substantial for most American cars and trucks.”