Trump Eases Tariffs on Canada and Mexico Amid Rising Trade Tensions

President Donald Trump has signed orders expanding exemptions on tariffs imposed this week on goods from Canada and Mexico, marking the second rollback in as many days. The move follows mounting uncertainty for businesses and turbulence in financial markets.

On Wednesday, Trump announced a temporary reprieve for carmakers, exempting them from a 25% import tariff just one day after the duties took effect.

The decision was met with relief from Mexican President Claudia Sheinbaum, who thanked Trump, while Canada’s finance minister confirmed the country would delay a planned second wave of retaliatory tariffs on U.S. products.

However, Canadian Prime Minister Justin Trudeau signaled that tensions remain high, revealing that a phone call with Trump over the tariffs had been “colorful” and, according to reports, laced with profanity.

“A trade war between our two countries appears likely for the foreseeable future,” Trudeau told reporters on Thursday. “Our goal remains to get all tariffs removed.”

Sheinbaum, meanwhile, described her discussion with Trump as “excellent and respectful,” noting that both countries would collaborate to curb the flow of fentanyl from Mexico to the U.S. and tackle gun trafficking into Mexico.

Exemptions and Economic Impact

The latest exemptions apply to goods traded under the U.S.-Mexico-Canada Agreement (USMCA), the free trade pact signed during Trump’s first term.

The deal currently facilitates tariff-free imports of items such as televisions, air conditioners, avocados, and beef, according to Trade Partnership Worldwide.

Additionally, Trump reduced tariffs on potash—a key fertilizer ingredient—from 25% to 10%, easing concerns among U.S. farmers.

Despite these concessions, a White House official estimated that roughly 50% of U.S. imports from Mexico and 62% from Canada may still face tariffs, with those figures subject to change as companies adjust their supply chains.

The administration remains committed to its broader tariff agenda, with officials set to unveil a plan for “reciprocal” trade duties on various countries on April 2.

The ongoing trade tensions have rattled financial markets, with the S&P 500 index falling nearly 1.8% on Thursday. George Godber, a fund manager at Polar Capital, described Trump’s shifting tariff policy as “hokey cokey” and said it has made production planning “nearly impossible” for businesses.

“It’s putting pressure on the U.S. economy while galvanizing a stronger response from Europe, particularly Germany,” Godber added.

Trump dismissed suggestions that stock market concerns influenced his decision.

“This has nothing to do with the market,” he asserted. “I’m not even looking at the market because, in the long term, the United States will be very strong with what’s happening.”

Strong Reactions from Canada and U.S. Officials

Ontario Premier Doug Ford, who leads Canada’s most populous province, dismissed the tariff relief as insufficient.

“A pause on some tariffs means nothing,” Ford said. Earlier, before the exemptions were announced, he warned that Ontario would press ahead with a 25% tariff on electricity exports to New York, Michigan, and Minnesota, affecting 1.5 million homes and businesses.

U.S. Treasury Secretary Scott Bessent took a hardline stance against Canadian retaliation, calling it counterproductive.

“If you want to be a numbskull like Justin Trudeau and say, ‘Oh, we’re going to do this,’ then tariffs are probably going to go up,” Bessent said during a speech at the Economic Club of New York on Thursday.

With billions of dollars in trade flowing daily between the U.S., Canada, and Mexico, the three economies remain deeply intertwined after decades of free trade agreements.

Trump argues that tariffs will protect American industries and reinvigorate manufacturing. However, many economists warn that such measures could raise prices for U.S. consumers and trigger economic downturns in Canada and Mexico.

Daniel Anthony, president of Trade Partnership Worldwide, noted that $1 billion in trade crosses U.S. borders daily without claiming USMCA duty-free exemptions.

“Whether importers can or will start claiming USMCA remains to be seen, but there’s a huge amount of money at stake,” Anthony said.

In the U.S., economic data already shows signs of tariff-related disruption. Imports surged in January amid fears of impending duties, with the U.S. trade deficit climbing 34% to more than $130 billion, according to Commerce Department figures.

Gregory Brown, CEO of BenLee, a trailer manufacturing company, said he has had to adjust prices multiple times in the past five weeks due to Trump’s policies, including a forthcoming expansion of tariffs on steel and aluminum.

Despite the volatility, Brown remains optimistic, noting that his customers continue to pay the higher costs.

“It’s a great growth economy,” he said, adding that economic strength persisted under President Joe Biden as well. Brown views Trump’s swift tariff adjustments as a sign of a business-savvy leader adapting to market realities.

As trade tensions persist, all eyes remain on Washington’s next moves, with industries bracing for potential new policy shifts in the weeks ahead.