US backs off Mexico, Canada tariffs

US President Donald Trump on Thursday delayed some tariffs targeting Canada and Mexico, leading Ottawa to halt an upcoming wave of countermeasures — offering a reprieve to companies and consumers after blowback on financial markets.

Stock markets tumbled after Trump’s duties of up to 25% took effect Tuesday, as economists warned that blanket levies could weigh on US growth and raise inflation.

Trump signed orders Thursday to hit pause on the fresh tariffs for Canadian and Mexican imports covered by a North American trade agreement, though he dismissed suggestions that his decisions were linked to market turmoil.

The halt — which will last until April 2 — offers relief to automakers.

In the auto sector, parts cross North American borders multiple times during production.

Following talks with the “Big Three” US automakers — Stellantis, Ford and General Motors — Washington initially announced a one-month exemption on autos coming through the United States-Mexico-Canada Agreement (USMCA).

A White House official told reporters that about 62% of Canadian imports will still face the new tariffs, although much of these are energy products hit by a lower rate of 10%.

About half of Mexican imports come through the USMCA.

The latest moves make conditions “much more favorable for our American car manufacturers,” Trump said Thursday.

Shortly after Trump’s decision, Canadian Finance Minister Dominic LeBlanc wrote on X that his country “will not proceed with the second wave of tariffs on $125B of US products until April 2nd, while we continue to work for the removal of all tariffs.”

Trump said more tariffs would come on April 2, adding they will be “reciprocal in nature.” He had earlier vowed reciprocal levies to remedy practices Washington deems unfair.

At that point, Canadian and Mexican goods could still face levies.

The US president also said he would not modify broad tariffs for steel and aluminum imports, which are due to take effect next week.

US stock markets slumped again Thursday despite the new measures.

‘Tremendous progress’

Trump told reporters Thursday in the Oval Office that he had a “very good conversation” with Mexican President Claudia Sheinbaum.

He claimed “tremendous progress” on both illegal immigration and drugs coming into the United States — both reasons that Washington cited in imposing levies on Mexico, Canada and China.

His remarks stood in sharp contrast to simmering tensions with Canadian Prime Minister Justin Trudeau.

Trudeau said Thursday that Ottawa will remain in a trade war with Washington for “the foreseeable future” even if there are “breaks for certain sectors.”

“Our goal remains to get these tariffs, all tariffs removed,” Trudeau added.

Canada contributes less than one percent of fentanyl to the illicit US supply, according to Canadian and US government data.

China, meanwhile, has pushed back on US allegations of its role in the fentanyl supply chain, and instead touted its cooperation with Washington on the issue.

“The United States should not repay kindness with resentment, let alone impose tariffs without reason,” Chinese Foreign Minister Wang Yi said in Beijing.

“China-US economic and trade ties are mutual. If you choose to cooperate, you can achieve mutually beneficial and win-win results. If you use only pressure, China will firmly counter.”

‘Economic reality’

For Scott Lincicome, vice president of general economics at the Cato Institute, Trump’s easing of tariffs was “a recognition of economic reality” — that tariffs disrupt supply chains and the burden falls mainly on Americans.

“The market doesn’t like them and certainly doesn’t like the uncertainty surrounding them,” Lincicome told AFP.

Since taking office for his second term in January, Trump has made tariff threats on allies and adversaries alike.

US Treasury Secretary Scott Bessent said Thursday that he was not concerned Trump’s tariffs would be inflationary, adding that any impact on prices would likely be temporary.

Trump has referred to tariffs as a source of US government revenue and a way to remedy trade imbalances.

The US trade deficit surged to a new record in January, ballooning 34% to $131.4 billion as imports rose.

Analysts say the deficit was likely bolstered by gold imports, but that data suggests businesses were also trying to get ahead of tariffs.