Trump delays tariffs on Canada and Mexico; Canada pauses retaliatory measures

Trump temporarily suspends key trade levies amid market turmoil

On Thursday, US President Donald Trump announced a temporary delay in imposing 25% tariffs on various goods from Canada and Mexico. The decision follows intense backlash from financial markets and businesses, which warned that broad levies could harm economic growth and increase inflation.

The move offers short-term relief to industries reliant on North American trade, particularly the auto sector, where parts cross borders multiple times during production. However, Trump insisted that the delay was not influenced by stock market reactions but was instead aimed at supporting American manufacturers.

Canada delays counter-tariffs following Trump’s decision

Shortly after Trump’s announcement, Canadian Finance Minister Dominic LeBlanc declared that Canada would postpone its planned second wave of retaliatory tariffs on $125 billion worth of US goods until April 2.

“Canada 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,” LeBlanc posted on X.

Canada had originally planned to impose additional tariffs on US products such as electric vehicles, agricultural goods, electronics, steel, and trucks by late March. However, following Trump’s decision to ease restrictions, Ottawa has decided to delay these measures.

Despite this concession, the first phase of Canada’s retaliatory tariffs—covering $30 billion worth of US imports—remains in place. Two senior Canadian officials confirmed that these initial levies, implemented in response to Trump’s earlier 25% tariffs on Canadian imports, will not be rescinded.

Tariff delay under USMCA—but not for all products

The suspension primarily applies to imports covered under the United States-Mexico-Canada Agreement (USMCA), providing a temporary exemption for many auto-related products. However, a White House official clarified that the decision is not retroactive, meaning tariffs paid on imports between Tuesday and Thursday will not be refunded.

Despite the exemptions, around 62% of Canadian imports and nearly half of Mexican imports are still expected to face tariffs due to non-compliance with USMCA trade regulations. Notably, Canadian potash used by US farmers and energy products will be taxed at a 10% rate.

Market reactions and political fallout

Financial markets continued to slump despite the tariff delay, signaling uncertainty over the broader trade conflict. The auto industry, in particular, welcomed the temporary reprieve, as manufacturers rely on cross-border supply chains.

Trump, however, reaffirmed that additional tariffs will be imposed after April 2, stating that they will be “reciprocal in nature” to counter trade practices the US government deems unfair. The administration also confirmed that tariffs on steel and aluminum imports will proceed as scheduled next week.

Diverging responses from Canada and Mexico

Trump stated that he had a “very good conversation” with Mexican President Claudia Sheinbaum, claiming “tremendous progress” on issues related to illegal immigration and drug trafficking—key justifications for the tariffs on Mexico, Canada, and China.

Canadian Prime Minister Justin Trudeau, however, took a more confrontational stance. He warned that Canada remains locked in a trade war with the US “for the foreseeable future,” despite temporary exemptions for certain sectors.

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

Government data from both countries indicates that Canada contributes less than 1% of fentanyl to the illicit US supply, challenging Trump’s justification for tariffs as a means to curb drug trafficking. Meanwhile, China has rejected US accusations about its role in the fentanyl supply chain, arguing that tariffs will not resolve domestic drug issues.

Economic and policy implications

According to Scott Lincicome, vice president of general economics at the Cato Institute, Trump’s tariff delay reflects a “recognition of economic reality.” He noted that the move acknowledges disruptions in supply chains and the financial burden of tariffs on American businesses and consumers.

Despite concerns over inflationary pressures, US Treasury Secretary Scott Bessent downplayed fears that Trump’s tariff policies would significantly impact prices. He argued that access to cheap goods is not the core of the “American Dream,” which he described as centered on upward mobility and economic security.

Trump has repeatedly framed tariffs as a tool to generate government revenue and address trade imbalances. However, recent data shows the US trade deficit surged to a record high of $131.4 billion in January, marking a 34% increase. Analysts suggest that businesses may have accelerated imports to get ahead of potential tariff hikes.

With Trump’s delay in place, all eyes will be on April 2, when new levies could still be imposed on Canadian and Mexican goods.

For all the latest updates, download PGurus App.

The post Trump delays tariffs on Canada and Mexico; Canada pauses retaliatory measures appeared first on PGurus.