On Thursday, U.S. President Donald Trump put a hold on the 25% tariffs he had imposed earlier in the week on most imports from Canada and Mexico, marking the latest shift in a volatile trade policy that has unsettled markets and fueled concerns over inflation and economic growth.
The exemptions for 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, who imposed the levies on Tuesday, had mentioned an exemption only for Mexico earlier on Thursday, but the amendment he signed later that day 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 ($87.4 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 levy of 10%.
A White House official said that was because not all energy products imported from Canada are covered by 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, saying the deadly opioid and its precursor chemicals make their way from China to the United States via Canada and Mexico.
Trump has also imposed tariffs of 20% on all imports from China as a result.
China said it would “resolutely counter” pressure from the United States on the fentanyl issue, urging the United States to resolve the abuse of the drug itself.
“No country can imagine that it can suppress China on one hand while developing good relations with China on the other hand,” Foreign Minister Wang Yi told a briefing in Beijing on Friday.
Trump first announced the levies at the beginning of February, but delayed them until Tuesday for Canada and Mexico. This week he declined further delay, and doubled a 10% levy enforced on Chinese imports since February 4.
“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 tariffs of 25% on imports of steel and aluminum would take 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 the exemptions after meeting executives from the top U.S. auto makers, Ford, General Motors and Stellantis.
No Buy-In From Markets
U.S. stock markets resumed their recent sell-off on Thursday, with investors citing the back-and-forth developments on tariffs as a concern. Economists have warned the levies may rekindle inflation and slow demand and growth in their wake.
The S&P 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 creating uncertainty in markets, said Bill Sterling, global strategist at GW&K Investment Management in Boston.
“How can you make decisions about where you locate an auto plant between the United States and Canada right now?”
Lutnick said that the White House was not looking to market reaction for guidance.
Prime Minister Justin Trudeau, who is stepping down as Canada’s leader on Sunday, said he did not expect the trade war to abate 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.
U.S. Treasury Secretary Scott Bessent called Trudeau a “numbskull.”
Mexican officials offered no immediate response to the tariff delay, though President Claudia Sheinbaum held a telephone call with Trump earlier on Thursday, 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, sources from both countries told Reuters.
($1=1.4307 Canadian dollars)
(With inputs from Reuters)
