President Donald Trump has decided to postpone the implementation of his proposed 25% tariffs on Canadian goods, effective until April 2, specifically for products covered by an existing trade agreement. This announcement, reported by multiple outlets on Thursday, follows a similar delay for tariffs on Mexico, marking a temporary retreat from his aggressive trade strategy.
Key Facts
On Thursday, Trump signed executive orders exempting goods traded under the United States-Mexico-Canada Agreement (USMCA) from the new tariffs until April 2. At that point, Trump has indicated that reciprocal tariffs would become effective. Commerce Secretary Howard Lutnick had indicated on CNBC that an agreement was likely to be reached regarding the temporary exemptions under the USMCA, which was negotiated during Trump’s first term.
In a post on Truth Social shortly after Lutnick’s remarks, Trump confirmed an agreement with Mexican President Claudia Sheinbaum to delay tariffs on USMCA-covered products until April, describing this decision as “an accommodation” made out of respect for Sheinbaum.
Initially, Trump had imposed the 25% tariffs on both Canada and Mexico due to dissatisfaction with their handling of fentanyl transportation into the U.S., but he has since made various adjustments, including a temporary pause for automakers. Lutnick suggested that if enough progress is made in addressing the fentanyl issue, the conversation would shift solely to reciprocal tariffs.
Market Response
The stock market reacted to these developments, with losses shrinking after Lutnick’s comments. The S&P 500 index, which had been down over 1.5% earlier in the day, decreased by about 0.7% by late morning. Nevertheless, overall stock performance remains adversely impacted this week, with the S&P down nearly 3% since last Friday, marking its lowest levels since before the election.
Surprising Fact
Despite the announced tariff delays, Trump continued to criticize Canada via Truth Social roughly 30 minutes before confirming the tariff pause for Mexico. In his post, he mentioned discontent with Prime Minister Justin Trudeau, implying that Trudeau may be leveraging the tariff issue to bolster his chances for re-election.
Key Background
Trump initially proposed the 25% tariffs on Canada and Mexico back in February, but both nations received a one-month reprieve after agreeing to enhance border security measures. Alongside these tariffs, Trump had also instituted a 10% tariff on China in February, which was later increased to 20%, although shipments valued under $800 were exempted. Leaders from Canada, Mexico, and China have voiced threats of retaliatory tariffs against the U.S. Recently, Trump addressed the potential adverse impacts of his tariffs during his joint address to Congress, appealing to affected farmers and citizens to “bear with him” as there may be a transition period. Tariffs have raised concerns among economists, who generally believe they tend to result in increased consumer prices.
