President Donald Trump on Thursday postponed 25 per cent tariffs on many imports from Mexico and some imports from Canada for a month amid widespread fears of the economic fallout from a broader trade war.
The White House insists its tariffs are about stopping the smuggling of fentanyl, but the taxes proposed by Trump have caused a gaping wound in the decades-old North American trade partnership. Trump’s tariff plans have also caused the stock market to sink and alarmed U.S. consumers.
In addition to his claims about fentanyl, Trump has insisted that the tariffs could be resolved by fixing the trade deficit and he emphasised while speaking in the Oval Office that he still plans to impose “reciprocal” tariffs starting on April 2.
“Most of the tariffs go on April the second,” Trump said before signing the orders. “Right now, we have some temporary ones and small ones, relatively small, although it’s a lot of money having to do with Mexico and Canada.” Trump said he was not looking to extend the exemption on the 25 per cent tariff for autos for another month.
Imports from Mexico that comply with the 2020 USMCA trade pact would be excluded from the 25 per cent tariffs for a month, according to the orders signed by Trump. Auto-related imports from Canada that comply with the trade deal would also avoid the 25 per cent tariffs for a month, while the potash that US farmers import from Canada would be tariffed at 10 per cent, the same rate at which Trump wants to tariff Canadian energy products.
Roughly 62 per cent of imports from Canada would likely still face the new tariffs because they’re not USMCA compliant, according to a White House official who insisted on anonymity to preview the orders on a call with reporters. Half of imports from Mexico that are not USCMA compliant would also be taxed under the orders being signed by Trump, the official said.
Mexico President Claudia Sheinbaum has planned to announce any retaliatory measures on Sunday, but Trump credited her with making progress on illegal immigration and drug smuggling as a reason for again pausing tariffs that were initially supposed to go into full effect in February.
“I did this as an accommodation, and out of respect for, President Sheinbaum,” Trump said on Truth Social. “Our relationship has been a very good one, and we are working hard, together, on the Border.” Trump’s actions also thawed relations with Canada somewhat, after its initial retaliatory tariffs of $30 billion Canadian (US$21 billion) on US goods. The government said it had suspended its second wave of retaliatory tariffs on additional U.S. goods worth $125 billion (US$87 billion).
Major US stock markets briefly bounced off lows after Commerce Secretary Howard Lutnick previewed the month-long pauses on CNBC on Thursday. Significant declines already seen this week resumed within an hour. The S&P 500 stock index has fallen below where it was before Trump was elected.
Asked whether the stock market decline was due to his tariffs, Trump said: “A lot of them are globalist countries and companies that won’t be doing as well because we’re taking back things that have been taken from us many years ago.” Sheinbaum said she and Trump “had an excellent and respectful call in which we agreed that our work and collaboration have yielded unprecedented results,” on a post on the social media platform X, formerly Twitter.
Mexico has cracked down on cartels, sent troops to the US border and delivered 29 top cartel bosses long chased by American authorities to the Trump administration in a span of weeks.
At a press conference, Sheinbaum elaborated on her call with Trump Thursday, saying that she told the president that Mexico was making great strides in fulfilling his security demands.
“I told him we’re getting results,” Sheinbaum said. But the US imposed the tariffs, so she asked Trump “how are we going to continue cooperating, collaborating with something that hurts the people of Mexico?” She added that “practically all of the trade” between the US and Mexico will be exempt from tariffs until April 2.
She said the two countries will continue to work together on migration and security, and to cut back on fentanyl trafficking to the US.
From January to February, the amount of fentanyl seized at the border dropped more than 41 per cent, according to Sheinbaum, citing data from US Customs and Border Protection. She cited the dip as meeting a commitment made to Trump.
Still, relations between the United States and Canada remain frosty because of the tariff pressures.
A senior Canadian government official said Canadian Prime Minister Justin Trudeau’s call on Wednesday with Trump became heated. The US president used profanity while complaining about protections in Canada’s dairy industry. The official, who spoke on condition of anonymity as they were not authorised to speak publicly about the call, said Trudeau did not use profanity.
Ontario Premier Doug Ford, the leader of Canada’s most populous province, said that starting Monday the province will charge 25 per cent more for electricity shipped to 1.5 million Americans in response to Trump’s tariff plan. Ontario provides electricity to Minnesota, New York and Michigan.
“This whole thing with President Trump is a mess,” Ford said Thursday. “This reprieve, we’ve went down this road before. He still threatens the tariffs on April 2.” Ford has said that so long as the threat of tariffs continue, Ontario’s position will not change.