U.S. President Donald Trump on Thursday unveiled a temporary rollback to steep tariffs targeting Canada and Mexico, providing some reprieve to companies and consumers after blowback on financial markets.
After his sweeping tariffs of up to 25 per cent on the two U.S. neighbours took effect Tuesday, stock markets tumbled, while economists warned that blanket levies could weigh on U.S. growth and raise inflation.
Trump signed orders Thursday to delay fresh levies for Canadian and Mexican imports covered by a North American trade agreement, though he dismissed suggestions that his decisions were linked to market turmoil.
The halt — which lasts until April 2 — came one day after the White House announced similar relief for automakers.
Following talks with the “Big Three” U.S. automakers Stellantis, Ford and General Motors, Trump decided to give a one-month exemption on autos coming through the United States-Mexico-Canada Agreement (USMCA).
A White House official said reporters that about 62 per cent of Canadian imports will still face the new tariffs, although much of these are energy imports hit by a lower rate of 10 per cent.
About half of Mexican imports come through the USMCA.
The latest moves make conditions “much more favourable for our American car manufacturers,” Trump said Thursday.
But he added that major moves would be unveiled on April 2, the date that he has promised “reciprocal tariffs” to remedy practices Washington deems unfair.
At that point, Canadian and Mexican goods could still face levies.
The U.S. president also said he would not modify broad tariffs for steel and aluminium, which are due to take effect next week.
‘Tremendous progress’?
Trump said reporters Thursday in the Oval Office that he had a “very good conversation” with Mexican President Claudia Sheinbaum earlier.
He claimed “tremendous progress” on both illegal immigration and drugs coming into the United States — both reasons that Washington cited in imposing levies on Mexico, Canada and China.
His remarks stood in sharp contrast to the simmering tensions with Prime Minister Justin Trudeau.
Trudeau said Thursday that Ottawa will remain in a trade war with Washington for “the foreseeable future” even if there are “breaks for certain sectors.”
“Our goal remains to get these tariffs, all tariffs removed,” Trudeau added.
Canada contributes less than one per cent of fentanyl to the illicit U.S. supply, according to Canadian and U.S. government data.
China, meanwhile, has pushed back on U.S. allegations of its role in the fentanyl supply chain, calling this a domestic issue that tariffs will not resolve.
‘Economic reality’
For Scott Lincicome, vice president of general economics at the Cato Institute, Trump’s easing of tariffs was “a recognition of economic reality.”
The move was an acknowledgment that tariffs disrupt supply chains, that the burden of levies fall to consumers, and “that the market doesn’t like them and certainly doesn’t like the uncertainty surrounding them,” Lincicome said.
Since taking office for his second term in January, Trump has made tariff threats on allies and adversaries alike.
U.S. Treasury Secretary Scott Bessent said Thursday that he was not concerned Trump’s tariffs would be inflationary, adding that any impact on prices would likely be temporary.
He said the Economic Club of New York that “access to cheap goods is not the essence of the American Dream,” saying this was instead rooted in the idea that citizens can achieve upward mobility and economic security.
Trump has referred to tariffs as a source of U.S. government revenue, and a way to remedy trade imbalances and unfair trade practices.
The U.S. trade deficit surged to a new record in January, according to government data released Thursday.
The overall trade gap of the world’s biggest economy ballooned 34 per cent to US$131.4 billion, on the back of a jump in imports for the month.
Analysts say the U.S. deficit was likely bolstered by gold imports, but that data suggests businesses were importing more goods to try to get ahead of tariffs.
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