U.S. President Donald Trump has last-minute suspended the planned tariffs on imports from Mexico and Canada, thus averting a threatening trade escalation in North America. The move came just hours before the levies were to take effect and gives both countries a 30-day respite to conduct further negotiations.
The withdrawal came about after separate phone conversations with Mexico's President Claudia Sheinbaum and Canada's Prime Minister Justin Trudeau. Both countries agreed to strengthen their border security, including the deployment of an additional 10,000 troops each and tougher measures against drug trafficking. Ottawa also announced a C$200 million anti-drug program and officially classified criminal cartels as terrorist organizations.
While North America takes a tariff break, China remains the focus of the US government. The additional 10 percent tariffs on Chinese goods will take effect on Tuesday as planned. Trump described the levies as an "opening salvo" in the renewed trade conflict with the world's second-largest economy. Beijing is considering countermeasures, including retaliatory tariffs, export controls, and a targeted devaluation of the national currency. Additionally, China plans to take legal action at the World Trade Organization (WTO). A phone call between Trump and China's President Xi Jinping is planned for the coming days, the White House announced.
The financial markets initially reacted nervously to Trump's surprising tariff announcements over the weekend. The Mexican peso and the Canadian dollar lost value, while U.S. stock prices came under pressure. After the reversal regarding Canada and Mexico, however, the markets recovered. Asian stock exchanges started with gains on Tuesday, and the U.S. stock market was also able to significantly reduce its losses.
Despite the temporary relaxation, uncertainty remains high. Trump's executive order reserves the right to reintroduce tariffs at any time if Mexico or Canada do not sufficiently combat illegal migration and drug trafficking. The president argued that higher import tariffs are necessary to exert pressure on neighboring countries.
Companies and trade associations in the USA warned of rising prices and disrupted supply chains as a result of the tariffs. Particularly affected would be automobile manufacturers, electronics companies, and retailers that rely on cross-border supply chains.
Sheinbaum described her conversation with Trump as a "good exchange" and emphasized Mexico's concern about illegal arms shipments from the USA to criminal groups in their country. She was able to convince Trump to take stronger action against these exports. Trudeau also spoke of a "constructive conversation" and highlighted that Canada is already implementing border security measures, including new helicopters, technology, and additional personnel.
