Trump Eases Tariffs on Imports from Canada and Mexico Amid Trade Tensions
U.S. President Donald Trump has signed orders to significantly expand exemptions for goods subject to his new tariffs on imports from Canada and Mexico, which were imposed earlier this week. This marks the second time in two days that Trump has scaled back his tariff measures, easing concerns for businesses and markets already unsettled by the uncertainty surrounding the new trade policies.
On Wednesday, Trump announced that carmakers would be temporarily spared from the 25% import duties just one day after they came into effect. Mexican President Claudia Sheinbaum expressed her gratitude for the decision, while Canada’s finance minister confirmed that Canada would delay its planned second round of retaliatory tariffs on U.S. products.
In a call on Thursday morning, Canadian Prime Minister Justin Trudeau shared that his conversation with Trump about tariffs had been "colourful," with reports indicating that Trump used profane language during the heated exchange. Despite this, Trudeau stated that a trade war between the two countries seemed inevitable for the near future, though he remained focused on the long-term goal of removing all tariffs.
Mexican President Sheinbaum described her call with Trump as "excellent and respectful," noting that the two leaders agreed to collaborate on curbing the flow of fentanyl from Mexico into the U.S. and addressing the trafficking of firearms from the U.S. into Mexico.
The tariff exemptions now apply to goods traded under the United States-Mexico-Canada Agreement (USMCA), which was signed by Trump during his first term. Among the goods affected are televisions, air conditioners, avocados, and beef, according to analysis by the firm Trade Partnership Worldwide. Additionally, tariffs on potash, a key fertilizer ingredient for U.S. farmers, have been reduced from 25% to 10%.
A White House official revealed that approximately 50% of U.S. imports from Mexico and 62% from Canada will still face tariffs, though these proportions could shift as companies adjust their practices in response to the policy changes.
The White House has also continued to advocate for future tariffs, promising further action on April 2, when officials are expected to announce recommendations for “reciprocal” trade duties targeting countries around the world.
The trade tensions have had a noticeable impact on markets, raising concerns about potential economic disruptions. The S&P 500 index dropped nearly 1.8% on Thursday, as investors reacted to the uncertainty.
George Godber, a fund manager at Polar Capital, criticized Trump’s fluctuating tariff approach, calling it "nigh on impossible" for businesses to manage their production lines and warning that it is putting additional pressure on the U.S. economy. At the same time, he noted that the ongoing uncertainty is generating a more positive response from European markets, particularly in Germany.
Despite these concerns, Trump dismissed the notion that his tariff rollbacks were motivated by market pressures. "Nothing to do with the market," he said. "I'm not even looking at the market because, long term, the United States will be very strong with what's happening."
Ontario Premier Doug Ford, who governs Canada's largest province, dismissed the tariff exemptions as insignificant, stating that a temporary pause on some tariffs "means nothing." Earlier, Ford had announced plans to implement a 25% tariff on electricity supplied to 1.5 million homes and businesses in New York, Michigan, and Minnesota starting on Monday.
Treasury Secretary Scott Bessent, speaking at the Economic Club of New York, labeled retaliation against the U.S. as counterproductive for trade negotiations, commenting, "If you want to be a numbskull like Justin Trudeau and say, 'Oh, we’re going to do this,’ then tariffs are probably going to go up."
The economies of the U.S., Canada, and Mexico are closely intertwined, with billions of dollars in goods crossing the borders each day. While Trump argues that tariffs will protect American industries and boost manufacturing, many economists warn that the new measures could lead to higher consumer prices in the U.S. and severe economic consequences for Mexico and Canada.
Daniel Anthony, president of Trade Partnership Worldwide, noted that around $1 billion in daily trade between the U.S., Canada, and Mexico does not currently qualify for duty-free exemptions under the USMCA, as it has traditionally been subject to low or no tariffs. Whether importers will begin claiming USMCA exemptions remains uncertain, but the potential financial implications are significant.
In the U.S., the economic effects of Trump’s policies are beginning to show. January saw a spike in imports driven by tariff fears, with the Commerce Department reporting a 34% increase in the trade deficit, which climbed to over $130 billion. Additionally, companies like BenLee, which manufactures large trailers, have had to adjust prices multiple times due to new tariff policies.
Gregory Brown, the company’s leader, indicated that, despite the challenges, his customers are currently agreeing to the higher prices, suggesting that the economy is holding steady. Brown also saw Trump’s decision to offer relief from new tariffs as a sign of a business-friendly president responding to "business reality."
