On Thursday, Commerce Secretary Howard Lutnick revealed that President Donald Trump is expected to announce a significant one-month delay on tariffs imposed on products covered by the USMCA free trade treaty. This move marks a notable reversal of the administration's key economic strategy, which has caused considerable unrest among markets, businesses, and consumers alike.
In an interview with CNBC, Lutnick stated that tariffs on all products compliant with the treaty from Mexico and Canada—most of which had been subjected to a 25% tariff just days prior—are likely to be paused. These tariffs will now be set to take effect on April 2, unless significant progress is made by both countries in addressing the crisis of fentanyl trafficking across the U.S. border.
Following Lutnick’s announcement, stock markets, which had initially plummeted at the start of the day, experienced a slight recovery but remained in the red. The Dow Jones Industrial Average was down approximately 100 points, or 0.3%, while the broader S&P 500 index fell by 0.6%, and the tech-heavy Nasdaq dropped 0.7%. The ongoing uncertainty surrounding the administration's trade policies has contributed to a downward trend in the market since Trump took office, with the Nasdaq declining by 6.4% and the S&P 500 down more than 3%.
The uncertainty surrounding trade policies has led many businesses to halt hiring and has significantly decreased consumer confidence. Investors have shifted their focus from stocks to safer investments, such as government bonds. During his recent joint address to Congress, Trump acknowledged the unpopularity of tariffs and the potential consequences they could have on the already inflation-burdened American public. In a candid moment, he appealed to farmers who might suffer due to retaliatory tariffs, asking them to “bear with me” as he warned of “a little disturbance.”
The ongoing back-and-forth regarding tariffs has left many in the corporate sector bewildered. Trump has frequently threatened to impose tariffs or temporarily implement them, only to later announce delays or pauses. This inconsistency has made it difficult for businesses to make informed decisions regarding investments and hiring practices. Trump initially campaigned on implementing steep tariffs immediately upon taking office but instead issued several executive actions aimed at investigating tariffs on various goods.
Despite announcing a 25% tariff on products from Canada and Mexico set to take effect on February 1, these tariffs were postponed first by days and then by a month, following negotiations between the countries to address illegal border crossings and fentanyl issues. Promised tariffs on China were implemented on February 4, but at a lower rate than initially suggested. The subsequent introduction of a 10% tariff also included the unexpected removal of the de minimis exclusion, a loophole allowing goods valued under $800 to enter the U.S. duty-free.
As Trump continues to navigate the complexities of trade relations, the future of tariffs remains uncertain. While he has proposed reciprocal tariffs and announced tariffs on steel and aluminum, the lack of clarity surrounding which countries and products will be affected raises questions about the administration's strategy moving forward. The latest developments in the tariff landscape demonstrate the profound impact of trade policies on market stability and economic growth.
