Trump delays Mexico and Canada tariffs for a month

Washington — President Donald Trump on Thursday exempted goods from both Canada and Mexico under a North American trade pact for a month from the 25% tariffs that he had imposed earlier this week in the latest twist in fast-shifting trade policy that has whipsawed financial markets and business leaders.

The exemption covers both of the two largest US trading partners. Trump had earlier mentioned an extension only for Mexico, but the amended tariffs order — initially issued on Tuesday — covers Canada as well.

For Canada, the amended order also excludes duties on potash, a critical fertiliser for US farmers, but does not fully cover energy products, on which Trump has imposed a separate 10% levy.

A White House official said that is because not all energy products imported from Canada are covered under the US-Mexico-Canada agreement on trade that Trump negotiated in his first term as president.

Trump imposed the tariffs after declaring a national emergency due to deaths from fentanyl overdoses, asserting that the deadly opioid and its precursor chemicals make their way from China to the US via Canada and Mexico. Trump has also imposed tariffs of 20% on all imports from China as a result.

The exemptions will expire on April 2, when Trump has threatened to impose a global regime of reciprocal tariffs on all US trading partners.

The development comes a day after 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.

US stock markets resumed their recent sell-off on Thursday, with investors citing the rapid-fire, back-and-forth developments on tariffs as a concern due to the uncertainty they are fanning. 

The S&P 500 lost 103.98 points, or 1.78%, to end at 5,738.65 points, while the Nasdaq Composite lost 483.97 points, or 2.61%, to 18,068.76. The Dow Jones Industrial Average fell 430.93 points, or 1%, to 42,575.66.

“The uncertainty created by rapidly shifting policy pronouncements can damage investment in particular and hurt the economy,” said Bill Sterling, global strategist at GW&K Investment Management. “The other thing that investors are concerned about is the size of the tariffs. This is way beyond what was experienced in 2018 and could raise inflation.”

Economists have warned that the levies may rekindle inflation that has already proven difficult to bring fully to heel, and slow demand and growth in its wake.

Reuters