President Trump said Thursday that he would allow both Mexico and Canada to avoid most US tariffs for a month, and would exempt products traded under the rules of the trade agreement he signed in his first term.
The move called on the president a 25% tariff to seriously damage our carmaker the day after he gave the carmaker a 30-day reprieve.
Trump played a fierce brink game against the North American economy this week. He gradually rolled some of them after imposing strict tariffs in Canada and Mexico. This approach has led to the stock market falling and turmoil between industries that rely on trade between Canada and Mexico, accounting for more than a third of US imports and US exports.
On Thursday, Trump signed an executive order allowing the suspension.
Trump had announced his decision about Mexico earlier in the day in a post about True Society. However, he had not made a similar announcement about Canada, and investors, economists and Canadians wondered whether America's northern neighbors would still face taxation.
Canadian Prime Minister Justin Trudeau said that after Trump said he would temporarily exempt Mexico, he said, “We can see that in the near future it will continue to a trade war launched by the US.”
“After talking to Mexican President Claudia Sinbaum, I agreed that Mexico does not have to pay tariffs on those that fall under the USMCA agreement,” Trump 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.”
The decision to suspend tariffs came after more volatility in the US stock market. This declined in morning transactions amid concerns about economic fallout from taxation.
After Trump's Secretary of Commerce, Howard Lutnick, the stocks initially tweaked higher, but the president said it was likely to exempt all products traded under the USMCA, but that stabilization did not continue. After Trump announced his decision on Mexico, the S&P 500 fell further, falling nearly 2% that day, suggesting investors were not mitigated by a temporary reprieve.
Not all imports are free from customs duties. Approximately 10% of Mexico's exports to the United States are outside the scope of the USMCA trade agreement, according to William Jackson, a leading emerging market economist at Capital Economics. 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.
The suspension does little to dull the overall economic pain Trump plans to inflict on tariffs. 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 has argued that tariffs do not promote inflation, but Treasury Secretary Scott Bescent acknowledged Thursday that there could be a temporary rise in prices.
“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 increased energy production and restrictions on rolling backs.
“Beyond the continuum, I'm not worried about inflation,” Becent said.
Alan Rappyport, Simon Romero and Ian Austin Reports of contributions.
