Trump Suspends 25% Tariffs on Canada and Mexico Amid Market Turmoil, Setting New Deadline for Trade War Escalation
U.S. President Donald Trump has suspended the 25% tariffs imposed earlier this week on most imports from Canada and Mexico, marking yet another unpredictable shift in his trade policy. The sudden policy reversal, announced Thursday, has sent shockwaves through financial markets, fueling concerns about inflation and economic growth.
Tariff Suspension Comes with an April 2 Deadline
The temporary exemptions granted to the two largest U.S. trading partners will expire on April 2. Trump has warned that unless Canada and Mexico take sufficient action against fentanyl trafficking, he will move forward with a broader reciprocal tariff system affecting all U.S. trading partners.
Initially, the White House had only considered an exemption for Mexico. However, an amendment signed later on Thursday extended the exemption to Canada, aligning with their shared commitments under the North American trade pact.
Canada Halts Retaliatory Tariffs, Exemptions for Key Products
In response to Trump’s decision, Canada has postponed its planned retaliatory tariffs on $87.4 billion worth of U.S. goods until April 2, according to Finance Minister Dominic LeBlanc. The revised White House order also removes tariffs on potash, a critical fertilizer for U.S. farmers. However, energy products remain partially affected, as Trump has imposed a separate 10% levy on certain Canadian energy exports. A White House official clarified that not all energy products fall under the U.S.-Mexico-Canada Agreement (USMCA), which Trump renegotiated during his first term.
Trump Ties Tariffs to Fentanyl Crisis, China Faces 20% Import Tariffs
Trump justified the tariffs by declaring a national emergency on January 20, citing the surge in fentanyl-related deaths. He claims that fentanyl and its precursor chemicals enter the U.S. primarily through Canada and Mexico after originating from China.
As part of his aggressive stance, Trump has also implemented 20% tariffs on all Chinese imports. China quickly condemned the move, vowing to “resolutely counter” U.S. pressure on the fentanyl issue. Chinese Foreign Minister Wang Yi warned that the U.S. cannot “suppress China on one hand while expecting good relations on the other.”
Markets React to Tariff Uncertainty, Auto Industry Exemptions
Trump’s tariff policy has wreaked havoc on financial markets, with the S&P 500 closing down 1.8% on Thursday, extending a nearly 7% decline since mid-February. Economists have cautioned that the tariffs could fuel inflation and dampen economic growth across North America.
On Wednesday, Trump issued a separate exemption for automotive goods from Canada and Mexico following meetings with top executives from Ford, General Motors, and Stellantis. The move was seen as an effort to mitigate inflationary risks and avoid supply chain disruptions in the auto sector.
Bill Sterling, global strategist at GW&K Investment Management, warned that the unpredictable trade policy is creating major uncertainty. “How can you decide where to build an auto plant between the U.S. and Canada when tariffs keep changing overnight?” he said.
Trade War Tensions Rise as April 2 Deadline Looms
With the tariff exemptions set to expire in less than a month, the uncertainty surrounding U.S. trade relations continues to mount. Trump has made it clear that unless Canada and Mexico curb fentanyl trafficking, the tariffs will be reinstated.
Commerce Secretary Howard Lutnick reinforced this stance in an interview with CNBC, stating, “On April 2, we’re moving forward with reciprocal tariffs unless Canada and Mexico meet our fentanyl crackdown expectations. If they don’t, these tariffs will stay.”
Trudeau and Sheinbaum Respond, U.S. Treasury Secretary Sparks Controversy
Outgoing Canadian Prime Minister Justin Trudeau, who is stepping down on Sunday, expressed skepticism about a resolution in the near future. “I can confirm that we will remain in a trade war launched by the United States for the foreseeable future,” he told reporters in Ottawa.
Meanwhile, Mexican President Claudia Sheinbaum held a phone call with Trump on Thursday, during which they agreed on the tariff delay. “We had an excellent and respectful conversation. Our collaboration has yielded unprecedented results while maintaining respect for our sovereignties,” Sheinbaum said in a statement.
However, U.S. Treasury Secretary Scott Bessent ignited further tensions by referring to Trudeau as a “numbskull.” Mexican and Canadian officials have expressed frustration with Trump’s inconsistent trade policies, with sources indicating a lack of clear guidance from the White House.
What’s Next? April 2 Deadline Holds the Key
As the clock ticks toward April 2, all eyes are on Canada and Mexico to see whether they can meet Trump’s demands and avoid the return of tariffs. The ongoing trade uncertainty is expected to keep markets on edge, with potential ripple effects on inflation and economic stability.
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