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Trump delays tariffs for goods under Mexico, Canada trade deal

Friday, March 07, 2025, 10:41 GMT+7

Canadian-made plywood is seen at POCO Building Supplies, a 106-year old business in Port Coquitlam, British Columbia, Canada on March 4, 2025. Photo: Reuters

WASHINGTON -- President Donald Trump suspended on Thursday the 25% tariffs he imposed this week on most goods from Canada and Mexico, the latest twist in a fluctuating trade policy that has whipsawed financial markets and fanned worries over inflation and a growth slowdown.

The exemptions, covering the two largest U.S. trading partners, expire on April 2 when Trump has threatened to impose a global regime of reciprocal tariffs on all U.S. trading partners.

Trump had imposed a 25% levy on imports from both countries on Tuesday and had mentioned an exemption only for Mexico earlier on Thursday, but the amendment he signed on Thursday afternoon covered Canada as well. The three countries are partners in a North American trade pact.

In response, Canada will delay a planned second wave of retaliatory tariffs on C$125 billion of U.S. products until April 2, Finance Minister Dominic LeBlanc said in a post on X.

For Canada, the amended White House order also excludes duties on potash, a critical fertilizer for U.S. farmers, but does not fully cover energy products, on which Trump has imposed a separate 10% levy. A White House official said that is because not all energy products imported from Canada are covered under the U.S.-Mexico-Canada Agreement on trade that Trump negotiated in his first term as president.

Trump imposed the tariffs after declaring a national emergency on January 20, his first day in office, due to deaths from fentanyl overdoses, asserting that the deadly opioid and its precursor chemicals make their way from China to the U.S. via Canada and Mexico. Trump has also imposed tariffs of 20% on all imports from China as a result.

Trump first announced the levies at the beginning of February, but he delayed them for Canada and Mexico until Tuesday. Earlier this week he declined to delay them again, and doubled a 10% levy that had been in force since February 4 on Chinese imports.

"On April 2, we're going to move with the reciprocal tariffs, and hopefully Mexico and Canada will have done a good enough job on fentanyl that this part of the conversation will be off the table, and we'll move just to the reciprocal tariff conversation," Commerce Secretary Howard Lutnick told CNBC. "But if they haven't, this will stay on."

Trump also said 25% tariffs on imports of steel and aluminum would go into effect as scheduled on March 12. Canada and Mexico are both top exporters of the metals to U.S. markets, with Canada in particular accounting for most aluminum imports.

On Wednesday Trump exempted automotive goods from the 25% tariffs he imposed on imports from Canada and Mexico as of Tuesday, levies that economists saw as threatening to stoke inflation and stall growth across all three economies.

Trump issued those exemptions after meeting with executives from the top U.S. auto makers, Ford, General Motors and Stellantis.

U.S. stock markets resumed their recent sell-off on Thursday, with investors citing the rapid-fire, back-and-forth developments on tariffs as a concern due to the uncertainty they are fanning. Economists have warned that the levies may rekindle inflation that has already proven difficult to bring fully to heel, and slow demand and growth in its wake.

The SP 500 closed down 1.8% and is now down nearly 7% since mid-February.

"A continuation of this on again, off again with tariffs particularly with Mexico and Canada" is what is creating uncertainty in markets, said Bill Sterling, global strategist at GWK Investment Management in Boston.

"The rational economic response to business leaders when there's such a high degree of uncertainty is to sit on their hands and just defer making decisions," Sterling said. "How can you make decisions about where you locate an auto plant between the U.S. and Canada right now?"

Lutnick said that the White House is not looking to market reaction for guidance.

"The fact that the stock market goes up or down a half percent on any given day is not the driving force of our outcomes," Lutnick said. "Our outcomes are driven by we want factory production in America."

Earlier on Thursday, Prime Minister Justin Trudeau, who is stepping down as Canada's leader on Sunday, said he does not expect the trade war that Trump has kicked off to abate any time soon.

"I can confirm that we will continue to be in a trade war that was launched by the United States for the foreseeable future," he told reporters in Ottawa.

There was no immediate response from Mexican officials, though President Claudia Sheinbaum earlier on Thursday held a call with Trump during which he had agreed to a delay.

"We had an excellent and respectful call in which we agreed that our work and collaboration have yielded unprecedented results, within the framework of respect for our sovereignties," Sheinbaum said in a post on X.

Mexican and Canadian officials have been frustrated by tariff negotiations with the Trump administration, with a lack of clarity over U.S. desires making a resolution seem impossible, sources from both countries told Reuters.

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Editor-in-Chief: LE THE CHU Publication permit 1332/BTTTT-PTTH&TTĐT, granted by the Ministry of Information and Communications of the Socialist Republic of Vietnam

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