Volkswacht Bodensee - Trump backs off Mexico, Canada tariffs after market blowback

After his sweeping tariffs of up to 25 percent on the two US neighbors took effect Tuesday, stock markets tumbled, as economists warned that blanket tariffs could weigh on US economic growth and raise inflation in the near-term.

Though the Republican president dismissed suggestions that his trade decisions were linked to market turmoil, he decided to pause the levies for trade with Canada and Mexico that falls under a regional pact.

Trump also lowered the new 25 percent levy on Canadian potash, a key element of fertilizer which US officials said their country does not produce much of.

The tariff halt -- which lasts until April 2 -- came one day after the White House also announced a temporary reprieve for automakers.

The moves make conditions "much more favorable for our American car manufacturers," Trump said Thursday.

But he added that major moves would be unveiled on April 2, the date that he has promised updates on "reciprocal tariffs" to remedy practices Washington deems unfair.

At that point, Canadian and Mexican goods could still face levies.

The US president also said he would not modify tariffs for steel and aluminum, which are due to take effect next week.

- 'Good' relationship with Mexico -

On the tariff halt for some Mexican goods, Trump said earlier on Truth Social that he "did this as an accommodation, and out of respect for" President Claudia Sheinbaum, adding: "Our relationship has been a very good one."

His remarks stood in sharp contrast to the simmering tensions with Canadian Prime Minister Justin Trudeau.

Trudeau said Thursday that Ottawa will remain in a trade war with Washington for "the foreseeable future" even if there are "breaks for certain sectors."

"Our goal remains to get these tariffs, all tariffs removed," Trudeau added.

- 'Economic reality' -

For Scott Lincicome, vice president of general economics at the Cato Institute, Trump's easing of tariffs on Mexico was "a recognition of economic reality."

The move was an acknowledgment that tariffs disrupt supply chains, that the burden of levies fall to consumers, and "that the market doesn't like them and certainly doesn't like the uncertainty surrounding them," Lincicome told AFP.

Since taking office for his second term in January, Trump has made a series of tariff threats on allies and adversaries alike.

Trump justified the tariffs on Washington's two neighbors and vital trade partners, along with China, as a way to stop illegal immigration and trafficking of the deadly drug fentanyl.

However, Canada contributes less than one percent of fentanyl to the illicit US supply, according to Canadian and US government data. It is also a relatively minor source of illegal immigration, compared to flows across the Mexican border.

China, meanwhile, has pushed back on US allegations of its role in the fentanyl supply chain, calling this a domestic issue that tariffs will not resolve.

US Treasury Secretary Scott Bessent said Thursday that he was not concerned Trump's tariffs would be inflationary, adding that any impact on prices would likely be temporary.

Trump has referred to tariffs as a source of US government revenue, and a way to remedy trade imbalances and unfair trade practices.

The US trade deficit surged to a new record in January, according to government data released Thursday.

The overall trade gap of the world's biggest economy ballooned 34 percent to $131.4 billion, on the back of a jump in imports for the month, said the Commerce Department.

Analysts say the US deficit was likely bolstered by gold imports, but data also suggests businesses were importing more goods to try to get ahead of potential tariffs.

T.Egger--VB