On Thursday, President Donald Trump announced the suspension of the 25% tariffs he had recently placed on most goods imported from Canada and Mexico. This decision marks another development in a volatile trade policy that has significantly impacted financial markets and raised concerns about inflation and economic growth.
The exemptions for these two major U.S. trading partners will remain in effect until April 2, at which point Trump has indicated he may implement a global system of reciprocal tariffs affecting all U.S. trading partners.
Initially, Trump had enacted a 25% tariff on imports from both nations on Tuesday and had only mentioned an exemption for Mexico earlier that day. However, the amendment he signed later that afternoon also included Canada. These three countries are part of a North American trade agreement.
In reaction to this announcement, Canada has decided to postpone a planned second round of retaliatory tariffs on C$125 billion worth of U.S. goods until April 2, as stated by Finance Minister Dominic LeBlanc in a post on X. The revised order from the White House also exempts potash, an essential fertilizer for U.S. agriculture, but does not fully eliminate tariffs on energy products, which are subject to a separate 10% levy imposed by Trump. A White House official explained that this is due to the fact that not all energy imports from Canada are included in the U.S.-Mexico-Canada Agreement negotiated during Trump’s first term.
The tariffs were introduced following Trump’s declaration of a national emergency on January 20, his first day in office, citing the opioid crisis linked to fentanyl overdoses. He claimed that the dangerous opioid and its precursor chemicals are trafficked from China to the U.S. through Canada and Mexico. Additionally, Trump has enforced a 20% tariff on all imports from China as part of his broader trade strategy.
Trump initially announced the tariffs in early February but postponed their implementation for Canada and Mexico until Tuesday. Earlier this week, he opted not to delay them further and increased the existing 10% tariff on Chinese imports, which had been in effect since February 4.
“On April 2, we will proceed with the reciprocal tariffs, and I hope that Mexico and Canada will have effectively addressed the fentanyl issue so that we can focus solely on the reciprocal tariff discussions,” stated Commerce Secretary Howard Lutnick during an interview with CNBC. “However, if they have not made sufficient progress, these tariffs will remain in place.”
Additionally, Trump confirmed that the 25% tariffs on steel and aluminum imports would take effect as planned on March 12. Canada and Mexico are significant suppliers of these metals to the U.S., with Canada being the primary source of aluminum imports.
On Wednesday, Trump announced exemptions for automotive products from the 25% tariffs imposed on imports from Canada and Mexico, effective Tuesday. Economists viewed these tariffs as potential catalysts for inflation and a hindrance to growth across all three economies. The exemptions followed discussions with executives from major U.S. automakers, including Ford, General Motors, and Stellantis.
MARKET REACTION
U.S. stock markets continued their recent decline on Thursday, with investors expressing concerns over the rapid and fluctuating developments regarding tariffs, which are contributing to market uncertainty. Economists have cautioned that these levies could reignite inflation, which has been challenging to control, and may dampen demand and economic growth.
The S&P 500 index fell by 1.8% and has decreased nearly 7% since mid-February.
Bill Sterling, a global strategist at GW&K Investment Management in Boston, noted that the ongoing fluctuations in tariffs, especially concerning Mexico and Canada, are contributing to market uncertainty. He explained, “In an environment marked by such significant uncertainty, the logical economic response for business leaders is to refrain from making decisions.” He posed the question, “How can one decide on the location of an auto plant between the U.S. and Canada under these circumstances?”
Lutnick emphasized that the White House is not influenced by market fluctuations. “The daily ups and downs of the stock market, even by half a percent, do not dictate our outcomes,” he stated. “Our focus is on increasing factory production in America.”
On Thursday, Prime Minister Justin Trudeau, who will resign as Canada’s leader on Sunday, expressed that he does not foresee an end to the trade conflict initiated by Trump in the near future. “I can confirm that we will remain in a trade war instigated by the United States for the foreseeable future,” he told reporters in Ottawa.
While there was no immediate comment from Mexican officials, President Claudia Sheinbaum mentioned earlier on Thursday that she had a productive call with Trump, during which they agreed to a delay. “We had an excellent and respectful conversation, agreeing that our collaboration has produced unprecedented results while respecting our sovereignties,” Sheinbaum posted on X.
Sources from both Mexico and Canada indicated that officials are frustrated with the tariff negotiations under the Trump administration, citing a lack of clarity regarding U.S. intentions, which makes reaching a resolution seem unattainable.
Discover more from Defence Talks | Defense News Hub, Military Updates, Security Insights
Subscribe to get the latest posts sent to your email.
