Trump lowers tariffs on Canada and Mexico
Trump reduces tariffs on Canada and Mexico in the latest fluctuation in trade policy. The United States has implemented a partial reduction of tariffs on select goods imported from Mexico and Canada, a decision influenced by declining market conditions and corporate lobbying directed at President Trump. This shift in trade policy has contributed to heightened tensions with allied nations and has exacerbated concerns regarding a potential recession.
Trump has granted a temporary suspension of 25% tariffs on a variety of goods for America’s neighboring countries and primary trading partners, positioning for another critical negotiation on April 2. The recent decision by Trump to retract tariffs on Mexico and Canada for the second time within a month underscores the volatility inherent in his trade policy framework. This comes concurrently with an increase in duties on Chinese imports and the impending implementation of wider tariffs on a range of countries in the upcoming month. Thursday’s reprieve does not resolve the ongoing trade tensions in North America. Certain goods will remain subject to new tariffs, as they fall outside the purview of the U.S.-Mexico-Canada Agreement (USMCA), according to U.S. officials.
Canadian Prime Minister Justin Trudeau indicated on Thursday that Canada is poised to engage in a trade conflict with the United States “for the foreseeable future.”“ Trudeau characterized the tariffs as a misguided decision and reportedly engaged in a contentious phone conversation with Trump, which The Wall Street Journal described as marked by raised voices and strong language. Treasury Secretary Scott Bessent characterized the premier as a “numbskull,” suggesting that his confrontational stance with the president would inevitably result in increased tariffs. “It may be surprising, but in light of the challenges he has presented for Canada, I contend that Justin Trudeau is leveraging the tariff issue, which he has significantly contributed to, as a strategy to position himself for another run at the Prime Minister’s office,” Trump stated in a post on his social-media platform. Trudeau is poised to resign in the near future as his party prepares to select a new leader. The head of Ontario, Canada’s largest province, announced that a 25% export tax on electricity exported to New York, Michigan, and Minnesota will be implemented on Monday. This measure will remain in effect until Trump rescinds all tariff threats directed at Canada, including the possible snapback on April 2.
The postponement of tariffs on Thursday underscored the evident rapport between President Trump and Mexican President Claudia Sheinbaum, particularly concerning the U.S. border at Ciudad Juárez, Mexico. “As I often articulate, one learns from experience; if you touch a stove once and suffer a burn, you are unlikely to repeat that action,” Ontario Premier Doug Ford remarked to reporters in Toronto. “The sole condition is to eliminate the tariffs without preconditions, engage in dialogue, and initiate progress on a revised USMCA agreement.”
A representative from the White House indicated that approximately 50% of imports from Mexico and 38% from Canada utilize preferences established under the USMCA, a trade agreement negotiated by Trump during his initial term, which superseded the 1994 North American Free Trade Agreement. Independent analysts at Trade Partnership Worldwide contest those figures, asserting that the true volume of USMCA-compliant goods originating from Canada is greater. U.S. officials have indicated that tariffs will be lifted on certain goods, including essential items such as automobiles and agricultural products that are fundamental to American consumers. Approximately 40% of imports from Canada and a comparable proportion from Mexico were not covered by the USMCA, yet they entered the U.S. duty-free due to the absence of tariffs on these products, irrespective of their country of origin. The imports encompass a range of products, including computers, medical equipment, telecommunication devices, and alcoholic beverages.
According to White House officials, those goods will now be subject to a 25% tariff. Firms consistently refrained from pursuing compliance with USMCA regulations, as the absence of tariff advantages rendered such efforts unproductive. On Thursday, equity markets experienced a decline despite the White House’s announcement regarding a partial reduction of tariffs. Technology equities declined, the U.S. dollar depreciated, and apprehensions regarding a potential recession impacted financial sector stocks. Trump enacted tariffs following the declaration of a national emergency at both the northern and southern borders, asserting that these levies would remain in place until Mexico and Canada curtailed the influx of fentanyl into the U.S. market and halted illegal migration.
In recent weeks, the number of border crossings from Mexico has declined to historic lows, prompting Mexican officials to deploy 10,000 troops to the border and intensify efforts against drug cartels. Canadian authorities have implemented their own border policies; however, migration and drug-related issues have not historically posed significant challenges at their border, prompting scrutiny of Trump’s justification. A representative from the White House indicated that Trump’s choice to provide a tariff reprieve followed discussions with the chief executives of Ford, GM, and Stellantis, during which the automotive firms pledged to relocate supply chains from Mexico and Canada back to the United States. The White House has clarified that the tariff exemptions will not apply retroactively, indicating that companies will not receive refunds for any tariffs paid since Tuesday.
The recent fluctuations in tariffs have caused unease beyond just the financial markets, prompting some Republican senators to urge the White House for greater transparency regarding their tariff strategy, as articulated by Indiana Senator Todd Young on Thursday. The rationale provided by the White House for the tariff reprieve, specifically the commitments from automakers regarding their supply chains, contributed to the uncertainty expressed by lawmakers on Thursday. They are questioning whether the tariffs are genuinely intended to address fentanyl trafficking, which is the official legal justification, or if they serve as a mechanism for reshoring manufacturing, or perhaps another purpose altogether.
“Do our tariffs on Canada reflect a response to inadequate cooperation regarding fentanyl trafficking, insufficient military funding for their responsibilities as a NATO member, or non-tariff barriers affecting U.S. goods and services?” Young expressed his thoughts publicly on Thursday. “Do they aim to enhance our domestic manufacturing capabilities and generate quality employment opportunities locally?” Is there a possibility of a combination of these factors? Which combination and to what extent of those factors hold the greatest significance?
Young remarked that the financial markets would assign significant value to this information, noting that he has received inquiries from “very strong conservatives—farmers, manufacturers, and diligent working individuals throughout Indiana—who are posing these questions.” Young was the most forthright in urging the White House to elucidate its tariff strategy, yet it was evident that other Senate Republicans shared a sense of confusion. “This represents the uncertainty inherent in conflict,” stated Missouri Senator Josh Hawley. “The underlying dynamics remain unclear at present, but clarity will emerge in due time.”
Democrats perceive the evolving policies as further evidence that the White House’s tariff actions are not genuinely aimed at addressing the drug trade. Instead, they argue, these measures serve as a pretext for initiating a continental trade conflict targeting Trudeau—whom Trump has a personal aversion to—and for garnering political support from the Republican base.“This is not a discussion centered on fentanyl in Canada; rather, it reflects a contest of personalities,” stated Sen. Tim Kaine (D., Va.), who recently proposed legislation aimed at rescinding Trump’s emergency order that supports the tariffs. Kaine previously characterized the fentanyl issue as “a fig leaf to amass a significant amount of funds, which can then be merged with the ‘savings’ achieved from reducing the federal workforce, ultimately to be redistributed through tax cuts.”
The postponement of tariffs underscored a notable instance of camaraderie between Trump and Mexican President Claudia Sheinbaum, whose approval ratings have surged in Mexico due to her management of the crisis instigated by the tariff threats. During a telephone conversation on Thursday, Sheinbaum reported that Trump initiated the dialogue by expressing his desire to maintain unilateral tariffs on goods imported from Mexico. Sheinbaum responded by highlighting Mexico’s substantial cooperation with the United States, noting the extradition of 29 incarcerated drug kingpins sought by American prosecutors.
“I informed him: President Trump, we are achieving results,” she stated during her daily news briefing. “However, in light of the tariffs you have enacted, what strategies can we employ to maintain our collaborative efforts in a manner that does not adversely affect Mexico?” Sheinbaum stated that she communicated with Trump. In a recent social-media statement, Trump remarked: “I undertook this action as a gesture of accommodation and in deference to President Sheinbaum.” Our partnership has proven to be quite effective, as we are collaboratively addressing issues at the border, focusing on both the prevention of unauthorized immigration into the United States and the interdiction of Fentanyl.
