Two days after imposing swept tariffs on Canada and Mexico, President Trump suddenly stopped many of these taxes on Thursday, causing confusion with investors and businesses that rely on trade with the country.
The president said he would allow products to be traded under the rules of the US-Canada Agreement, a trade agreement he signed in his first term, in order to avoid the harsh 25% tariffs he imposed on two of America's biggest trading partners a few days ago.
The suspension effectively waives many of the tariffs Trump has imposed on Canadian and Mexican products. He said the taxation he said was necessary to halt the flow of drugs and immigration into the United States.
His decision came the day after he said he would give the carmaker 30 days to spare. Automakers have accused that taxation will seriously damage US automakers. Trump hinted that the relief is short-lived, saying that other tariffs will come on Canadian and Mexican products in April.
Trump's chaotic, stop-and-start approach has led to the stock market falling over between industries that rely on trade between Canada and Mexico, accounting for more than a quarter of US imports and a third of US exports. After Trump imposed tariffs, Canada retaliated for taxation on $20.5 billion worth of American products, including agricultural products, and Mexico threatened to impose its own import tax on US goods on Sunday if Trump refused to relent.
Still, the decision to suspend tariffs did little to calm the financial markets. This has been unsettling since Trump ratcheted his trade war earlier this week. In addition to the blows in Canada and Mexico, Trump has imposed a second 10% tariff on all Chinese imports, urging retaliation from Beijing on American products. The president has not stopped taxation in China.
The S&P 500 fell 1.8% on Thursday, bringing the index slide to 3.6% this week, holding courses towards the worst week of the banking crisis two years ago, beating some of the country's small lenders.
Speaking from the White House on Thursday, Trump said his decision would protect American car makers and farmers. He insisted that there was “no delay” and that his order “has nothing to do with the market.”
“I don't even look at the market because in the long run, the US is very strong at what's going on here,” he said. “Now these are the countries and businesses, foreign companies that have torn us apart, and the President didn't do anything about it until I came.”
Trump's second term in office
As of March 6th
The president said he had suspended tariffs on many imports from the country in an earlier social media post, after speaking with the Mexican president. However, another round of tariffs he already promised is still waiting for April 2nd.
“After talking to Mexican President Claudia Sinbaum, I agreed that Mexico does not have to pay tariffs on those that fall under the USMCA contract,” he wrote on social media.
“Our relationship is very good and we work hard at the border in both ways, both in stopping illegal foreigners from entering the US and similarly stopping fentanyl,” he added.
Sinbaum posted “many thanks” to Trump on social media on Thursday, saying, “We had a great, respectful call for agreeing that our work and collaboration have resulted in unprecedented results.”
Later that day, Trump announced that his suspension would cover certain imports from Canada.
Canadian finance minister Dominique LeBlanc said Canada has suspended plans to impose a second round of retaliatory tariffs after Trump's move.
But Doug Ford, the prime minister of Ontario, the most populous province, has rejected the suspension. “All of this with President Trump is a mess,” Ford told reporters. “We went down this road before. He still threatens tariffs on April 2nd.”
Peter Navarro, a senior counselor in trade and manufacturing, told reporters Thursday that tariffs were to stop fentanyl's death. “What America needs right now is a strict commitment from China, Canada and Mexico to take action to stop the murder of Americans and immediately stop the fentanyl massacre,” he said.
Canada and Mexico are responding to Trump's tariffs with a variety of measures to strengthen border security, and US statistics show Canada is responsible for a small percentage of fentanyl coming to the US. There doesn't seem to be a real-time national data on deaths from fentanyl overdose — another indicator frequently cited by Trump officials.
Not all imports are free from customs duties. White House officials who explained to reporters that 38% of imports from Canada used USMCA preferences last year, and were not allowed to publicly say that about half of Mexican imports used it. Officials said oil imported from Canada was not normally the case and would face 10% tariffs.
The economists came up with different numbers for the number of items that could be affected by the tariff suspension. Approximately 15% of US goods imports from Canada and Mexico may not qualify for priority tariffs under the USMCA, according to calculations by the Peterson Institute for International Economics.
William Jackson, chief market economist at Capital Economics, said about 10% of Mexico's exports to the US are outside the scope of the USMCA trade agreement. That includes exports of several cars and machinery, he said.
“In both cases, this is because producers found it troublesome to comply with local content requirements necessary for tariff-free trade,” Jackson said. For example, BMW imports some vehicles from its San Luis Potosi factory, Mexico, rather than using USMCA conditions.
White House officials said the suspension was instigated by a US automaker. He in a call with the president Tuesday claimed that tariffs on cars in Canada and Mexico would charge billions of dollars of new expenses and effectively wipe out profits for all businesses.
Many other trade groups had raised similar complaints about tariffs, including farmers who rely on Canadian fertilizer imports and export their products to Canada and Mexico.
The executive order said Potato, a Canadian fertilizer that relies on US farmers, will be charged 10% instead of 25%.
“We don't need trees from Canada,” Trump said Thursday. “We don't need cars from Canada. We don't need energy from Canada.”
“So, if we have more oil and gas than anyone else, then we can be independent, which is most of the time. Our forests are huge, huge forests,” he continued. “We are not allowed to use it because of the environmental madman who stopped us.”
The suspension of tariffs may do little to dull the overall economic pain that Trump's taxation inflicts on. The president said he would impose a 25% tariff on all steel and aluminum as of March 12, and said he would announce tariffs on automobile imports and “mutual” tariffs on April 2. These taxes raise US tariffs to levels set by other countries, taking into account other practices that affect trade, such as taxes and currencies.
Trump's economic adviser argues that tariffs do not promote inflation. However, Treasury Secretary Scott Bescent acknowledged Thursday that prices could rise temporarily.
“Is tariffs likely to be a one-off price adjustment? Yes, Mr. Bescent said at the Economic Club in New York.
But Becent said he wasn't worried about trade policy leading to higher prices as part of Trump's broader economic agenda, including rising energy production and rising unwinding regulations.
“Beyond the continuum, I'm not worried about inflation,” Becent said.
Simon Romero and Ian Austin contributed to the report.
