Trump’s tariff strategy shifts, Canada and Mexico get relief

In a major change in policy, United States President Donald Trump has authorized directives to broaden exemptions for tariffs recently enforced on products from Canada and Mexico. This move signifies a major withdrawal from actions that had previously caused concern among companies and financial sectors. The exemptions, impacting significant areas of trade between the United States and its two foremost trade associates, come just a few days following the imposition of the tariffs.

In a significant policy shift, U.S. President Donald Trump has signed orders to expand exemptions for tariffs recently imposed on goods from Canada and Mexico. This decision marks a notable retreat from measures that had caused alarm among businesses and financial markets. The exemptions, affecting key sectors of trade between the U.S. and its two largest trading partners, come just days after the tariffs were implemented.

The announcement follows a series of adjustments to Trump’s trade policies. Earlier in the week, he temporarily spared automakers from a 25% import tax, a move that provided short-term relief to the struggling industry. Mexican President Claudia Sheinbaum expressed gratitude for the exemptions, while Canada’s Finance Minister indicated that the country would halt its plans to impose a second wave of retaliatory tariffs on U.S. goods.

In the meantime, Sheinbaum described her talks with Trump as “constructive and courteous,” highlighting the mutual dedication of Mexico and the U.S. to tackle urgent matters like the trafficking of fentanyl and weapons across their borders. The temporary exemptions pertain to products traded under the United States-Mexico-Canada Agreement (USMCA), a free trade deal established during Trump’s initial term. The agreement encompasses items like televisions, air conditioners, avocados, and beef, among other goods.

Besides exempting specific items, the new policies lower tariffs on potash, a vital fertilizer component, from 25% to 10%. Nonetheless, a White House representative noted that a large share of imports—roughly 50% of products from Mexico and 62% from Canada—continue to face tariffs. These numbers may change as companies adjust to the shifting trade regulations.

In spite of the limited alleviation, the White House stays devoted to its comprehensive tariff strategy. Officials have revealed intentions to implement new “reciprocal” trade duties aimed at other nations beginning April 2. This tactic has raised concerns among businesses and economists, who caution that these measures might result in higher consumer prices in the U.S. and cause economic instability in Canada and Mexico.

The trade disputes have started to affect financial markets, with the S&P 500 index declining nearly 1.8% on Thursday. George Godber, a fund manager at Polar Capital, criticized the administration’s inconsistent tariff strategies, arguing that it poses considerable difficulties for companies handling supply chains and production expenses. Although the U.S. economy remains robust for the time being, he observed that the uncertainty is eliciting stronger reactions from European markets, especially in Germany.

The trade tensions have already begun to impact financial markets, with the S&P 500 index falling nearly 1.8% on Thursday. George Godber, a fund manager at Polar Capital, criticized the administration’s inconsistent approach to tariffs, saying it creates significant challenges for businesses trying to manage supply chains and production costs. While the U.S. economy remains resilient for now, he noted that the uncertainty is prompting stronger responses from European markets, particularly in Germany.

The exemptions have elicited varied responses throughout North America. Ontario Premier Doug Ford minimized the importance of the tariff halt, describing it as “insignificant” in the larger framework of trade relations. Speaking earlier in the week, Ford revealed intentions to implement a 25% tariff on electricity exports to several U.S. states, such as New York, Michigan, and Minnesota, in reaction to the trade actions. “It’s not something we want to do, but we see no other option,” he remarked.

The exemptions have sparked mixed reactions across North America. Ontario Premier Doug Ford downplayed the significance of the tariff pause, calling it “meaningless” in the broader context of trade relations. Speaking earlier in the week, Ford announced plans to impose a 25% tariff on electricity exports to several U.S. states, including New York, Michigan, and Minnesota, as a response to the trade measures. “It’s not something we want to do, but we feel we have no choice,” he said.

Treasury Secretary Scott Bessent also weighed in on the trade tensions, criticizing Trudeau’s handling of the situation. Speaking at the Economic Club of New York, Bessent dismissed Canadian retaliation as counterproductive, stating, “If you want to act like a numbskull and escalate this, tariffs are only going to increase.”

Daniel Anthony, president of Trade Partnership Worldwide, pointed out that the exemptions within the USMCA could possibly save importers millions, yet he mentioned it’s uncertain how many companies will benefit from these carveouts. “There’s a significant financial impact involved, but whether businesses can swiftly adapt to leverage the USMCA advantages is still uncertain,” he remarked.

The impact of the trade policies is already being noticed in the U.S. economy. The Commerce Department reported a 34% rise in the trade deficit in January, now surpassing $130 billion, as companies hurriedly imported goods before the tariffs took effect. Gregory Brown, CEO of BenLee, a firm that manufactures trailers, stated that Trump’s policies have compelled him to repeatedly alter prices in recent weeks. Nonetheless, he mentioned that his clients have been willing to bear the increased costs, indicating the resilience of the current economy.

The U.S. economy is already beginning to feel the effects of the trade policies. According to the Commerce Department, January saw a 34% increase in the trade deficit, which now exceeds $130 billion, as businesses rushed to import goods ahead of the tariffs. Gregory Brown, CEO of BenLee, a company specializing in manufacturing trailers, said Trump’s policies have forced him to adjust prices multiple times in recent weeks. However, he noted that his customers have so far been willing to absorb the higher costs, reflecting the strength of the current economy.

Brown, who attended Bessent’s speech in New York, praised Trump for showing flexibility by expanding the exemptions, describing the move as a pragmatic response to business realities. “He’s listening to the needs of the economy and making adjustments,” Brown said.

As tensions between the U.S., Canada, and Mexico continue to simmer, the long-term implications of Trump’s tariff policies remain uncertain. While some sectors may benefit from the exemptions, others are likely to face ongoing challenges as the trade landscape evolves. For now, business leaders and policymakers will be watching closely as the April 2 deadline for new tariff measures approaches.