MEXICO CITY — On Thursday, President Donald Trump announced a one-month delay in the imposition of tariffs on select products imported from Mexico and Canada that comply with the North American Free Trade Agreement (NAFTA). This decision comes amidst ongoing fluctuations in U.S. trade relations, which have contributed to instability in financial markets for the third consecutive day.
Mexican President Claudia Sheinbaum revealed that she successfully persuaded Trump to postpone these tariffs during a phone conversation on Thursday morning. In early February, Trump had threatened to impose a hefty 25 percent tariff on all goods from Mexico and Canada, citing their inadequate efforts to combat illegal migration and the trafficking of fentanyl. However, he decided to delay these tariffs for a month while both countries worked on strengthening border security measures.
This temporary tariff suspension specifically applies to imports that adhere to the North American free-trade agreement, which was negotiated during Trump’s first term. According to a White House official, roughly 50 percent of goods from Mexico and 62 percent from Canada, including essential items like computers, will still be subject to tariffs that began this week. Notably, Canadian energy and potash, a critical ingredient in fertilizers, will be taxed at a reduced rate of 10 percent.
Earlier in the day, Trump took to his Truth Social platform to announce the tariff suspension, stating it was “an accommodation” made out of respect for President Sheinbaum. He emphasized the positive nature of their relationship, indicating that both nations are diligently collaborating on border issues, particularly in preventing illegal immigration and fentanyl trafficking.
The volatile tariff announcements have led to significant fluctuations in financial markets, with the Dow Jones Industrial Average dropping approximately 1 percent and the S&P 500 declining by 1.8 percent at the close of trading. Investors remain apprehensive about the uncertainty surrounding U.S. trade policy. “Are the tariffs on? Are they off? Who knows what’s next?” questioned Mike Schumacher, head of macro strategy at Wells Fargo, highlighting the challenge of navigating these unpredictable shifts.
Trump’s strategy to impose tariffs on all imports from Mexico and Canada could lead to increased prices for American consumers, a risky maneuver given the current concerns regarding inflation. In his recent address to Congress, Trump urged Americans to endure short-term disruptions for the promise of long-term benefits. Treasury Secretary Scott Bessent echoed this sentiment, stating that tariffs aim to establish a fairer international trading system, countering issues like wage suppression and currency manipulation.
However, some conservative economists who have previously advised Trump expressed confusion over the administration's inconsistent approach to tariffs. Stephen Moore, a visiting fellow at the Heritage Foundation, remarked, “It seems to change every hour in terms of what the negotiation is,” suggesting that this is not the ideal time to escalate tariff threats, especially with an upcoming jobs report that may not reflect positive trends.
In response to Trump’s tariff threats, President Sheinbaum noted in a morning news conference that she deployed 10,000 National Guard troops to the U.S. border. Additionally, she transferred 29 high-profile drug operatives to the United States, a controversial decision that legal experts suggest may violate Mexican law. Since early February, these troops have reportedly uncovered only about 130 pounds of fentanyl at the border, but Sheinbaum asserted that Mexico’s actions have deterred traffickers.
During her discussions with Trump, Sheinbaum highlighted Mexico’s achievements and questioned how cooperation could continue if tariffs adversely affect the Mexican populace. “The most important thing is my people,” she emphasized, advocating for a diplomatic approach to resolving trade tensions.
In Canada, the potential for a trade conflict has sparked outrage, with Prime Minister Justin Trudeau anticipating ongoing tensions with the United States. The Canadian government is actively pursuing negotiations for tariff relief across various sectors. Earlier this week, Canada announced retaliatory tariffs on $20 billion worth of U.S. goods, with plans to levy additional tariffs on another $90 billion in three weeks. Canadian Finance Minister Dominic LeBlanc confirmed that the government would postpone the second round of tariffs until April 2 while advocating for the removal of all tariffs.
Canadian officials have proactively engaged in diplomatic discussions with their U.S. counterparts to mitigate the impact of tariffs. They have also pointed out that less than 1 percent of fentanyl seized by U.S. authorities at land borders during the 2024 fiscal year originated from Canada.
Trump's focus on imposing tariffs on Mexico and Canada is driven by his desire to encourage manufacturing within U.S. borders, which has been in decline since the implementation of NAFTA in 1994. While the agreement contributed to job relocation, particularly to Mexico, many economists attribute the loss of 4.5 million manufacturing jobs in the U.S. to advancements in automation rather than solely to trade policies.
Despite the uncertainty surrounding the administration's tariff strategies, it has become clear that certain goods, including computers, beer, and fertilizer, which were traditionally exempt from tariffs, may now face a 25 percent tax due to their exclusion from the provisions of the United States-Mexico-Canada Agreement (USMCA).
The ongoing back-and-forth on tariffs is creating chaos for multinational companies that recently established operations in Mexico and Canada, largely in response to Trump's previous trade war with China. Javier Zarazua, a managing partner at JL Nearshoring, described the current climate as “chaos, pure chaos,” noting that many clients are hesitant to invest until the situation stabilizes. However, some remain optimistic that the rapid developments indicate a lack of commitment to long-term tariffs on Mexican imports, viewing Trump as a dealmaker in the negotiation process.
As trade relations continue to evolve, the implications for both consumers and businesses in the U.S., Canada, and Mexico remain to be seen. The future of tariffs and their impact on the economy will be closely monitored as negotiations progress.
