US President Donald Trump walked back on the 5 per cent tariffs on imports from Canada and Mexico on Thursday, postponing them for a month. This comes amid reports that the controversial policy began to stoke fears of economic fallout, including inflation and stock market crash.
Though Trump initially only exempted Mexico for a month from the 25% tariffs on imports after a call with Mexican President Claudia Sheinbaum, the amendment he signed on Thursday afternoon covered Canada as well. The exemptions would apply to US imports of products that are covered by the United States-Mexico-Canada Agreement. Goods that are not covered by the agreement remain subject to tariffs.
"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."
**'Not a moment to celebrate'**
The postponement brought some cheer after the major US stock markets briefly bounced off lows but the decision will continue to impact the markets.
Matthew Holmes, chief of public policy at the Canadian Chamber of Commerce, told CBS that though the delay mitigates some of the economic damage U.S. tariffs will cause, this is not a moment to celebrate. "The economy is not a toy to play with. Constant threats and economic uncertainty have taken their toll. We see it in delayed business investments, shaky consumer confidence, stalled capital flows and a volatile stock market. People's livelihoods are at stake," he said.
Chuck Dardas, president of AlphaUSA, an auto parts manufacturer in Livonia, Michigan, too wasn't impressed, stating investments are not possible without certainty. "The can keep getting pushed, kicked down the road, and we don’t know what that means,” said Dardas, adding that the only thing they are certain is that "we’ve got 30 more days to worry about it."
While 38% of all imports from Canada were covered by the USMCA in 2024, which will be exempted from tariffs, 49.6% of all imports from Mexico were covered under the agreement. This is the second time that Trump has announced and then backtracked on tariffs on its neighbours.
Canada responded to the move, stating it would delay a planned second wave of retaliatory tariffs on C$125 billion of U.S. products until April 2.
The Trump administration claims its tariffs are aimed at stopping the smuggling of fentanyl through the borders.