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Trump tariffs: US expands exemptions to Canada and Mexico tariffs Trump tariffs: US expands exemptions to Canada and Mexico tariffs
(about 2 hours later)
US President Donald Trump has signed orders significantly expanding the goods exempted from his new tariffs on Canada and Mexico.US President Donald Trump has signed orders significantly expanding the goods exempted from his new tariffs on Canada and Mexico.
It marks the second climbdown in two days from Trump on his taxes on imports from America's two biggest trade partners, measures that have raised uncertainty for businesses and worried financial markets.It marks the second climbdown in two days from Trump on his taxes on imports from America's two biggest trade partners, measures that have raised uncertainty for businesses and worried financial markets.
On Wednesday he said he would temporarily spare carmakers from 25% import taxes just a day after they came into effect.On Wednesday he said he would temporarily spare carmakers from 25% import taxes just a day after they came into effect.
Mexican President Claudia Sheinbaum thanked Trump for the move, which the White House said applied to goods shipped under North America's free trade agreement until 2 April. Mexican President Claudia Sheinbaum thanked Trump for the move while Canadian Prime Minister Justin Trudeau warned ahead of the orders that trade war between the two close allies was likely for the foreseeable future, despite some targeted relief.
The exemptions would currently apply to about 50% of US imports from Mexico and 38% from Canada, according to a White House official. It was not clear which Canadian goods were exempt. The carveout from the duties applies to goods shipped under North America's free trade agreement, the US-Mexico-Canada agreement (USMCA) , which Trump signed during his first term.
Commerce Secretary Howard Lutnick told CNBC earlier on Thursday that the temporary exemption of tariffs for car part imports from Canada and Mexico could be extended to all products that are part of the United States-Mexico-Canada Agreement (USMCA). About 50% of US imports from Mexico and 38% from Canada are currently shipped in compliance with that deal, according to a White House official.
The USMCA was established during Trump's first term of office. Its 34 chapters covered cars, dairy and lumber amongst other things such as financial services, and the agreement included a review every six years. In signing the orders, Trump dismissed claims that he was walking back the measures because of concerns about the stock market.
On Thursday, Trump wrote on Truth Social that Mexico would be exempt until 2 April. On Thursday afternoon, the leading US stock indexes were all lower, with the S&P 500, which tracks 500 of the biggest US companies, ending down nearly 1.8%.
"After speaking with President Claudia Sheinbaum of Mexico, I have agreed that Mexico will not be required to pay Tariffs on anything that falls under the USMCA Agreement," he said. The White House has continued to promote its plans for tariffs, promising action on 2 April, when officials have said they will unveil recommendations for tailored, "reciprocal" trade duties on countries around the world.
Sheinbaum said she had an "excellent and respectful" call with Trump, adding that the two countries would work together to stem the flow of the opioid fentanyl from Mexico into the US and curb the trafficking of guns going the other way. Trump said he agreed to grant the exemptions until 2 April after a phone call with Sheinbaum.
An exemption for Canada is expected to be announced later, despite Trump attacking Canadian Prime Minister Justin Trudeau on social media earlier on Thursday by saying he's done a "terrible job" for Canada. Sheinbaum said on Thursday that she had had an "excellent and respectful" call with Trump, adding that the two countries would work together to stem the flow of the opioid fentanyl from Mexico into the US and curb the trafficking of guns going the other way.
Trudeau said that discussions with officials within the Trump administration are ongoing, with the goal to get "all tariffs removed". Trump had also spoken to Trudeau. Trudeau described the call as heated, but "substantive" and said discussions with officials with the Trump administration were ongoing.
But Ontario Premier Doug Ford told CNN that the province would go ahead with a 25% tariff on the electricity it provides to 1.5 million homes and businesses in New York, Michigan and Minnesota from Monday. "Our goal remains to get these tariffs, all tariffs removed," he said.
The USMCA came into force in 2020 after years of negotiations and revisions. It was a revamp of the North American Free Trade Agreement, which was created in 1994. Before the relief was made official, but as it looked likely, Ontario Premier Doug Ford, who leads the country's most populous province, told CNN that the province still planned to go ahead with a 25% tariff on the electricity it provides to 1.5 million homes and businesses in New York, Michigan and Minnesota from Monday.
Goods worth billions cross the borders of the US, Canada and Mexico each day and their economies are deeply integrated. "... Honestly, it really bothers me. We have to do this, but I don't want to do this," he said.
The introduction of tariffs has sparked a trade war between the US, its neighbours and also China. Goods worth billions cross the borders of the US, Canada and Mexico each day and the economies of the three countries are deeply integrated after decades of free trade.
Trump has argued introducing tariffs will protect American industry and boost manufacturing. However, many economists warn tariffs could lead to prices rising for consumers in the US. Trump has argued introducing tariffs will protect American industry and boost manufacturing. However, many economists say tariffs could lead to prices rising for consumers in the US, while warning they could trigger severe economic downturns in Mexico and Canada.
Tariffs are paid by the business importing a product or part. Many US businesses have raised concerns about tariffs from America's two closest trade partners, given the integrated supply chains. In the US, the economy is starting to show the effects of the disruption from Trump's policies.
In response to Trump's initial 25% tariffs, Canada and Mexico also announced retaliatory import levies. Imports spiked in January on the back of tariff fears, with America's trade deficit increasing 34% to more than $130bn (£100bn), the Commerce Department reported.
Earlier on Thursday, the Commerce Department revealed US imports spiked in January on the back of tariff fears. Gregory Brown, who leads BenLee, a company that makes big trailers, said he had had to adjust prices multiple times over the last five weeks as a result of Trump's policies, which have included an order, set to go into effect later this month, expanding tariffs on steel and aluminium.
It said America's trade deficit had increased 34% to more than $130bn (£100bn), with imports for the month rising 10%. But Mr Brown, who attended a speech by Treasury Secretary Scott Bessent at the Economic Club of New York, said that for now, his customers are agreeing to pay the higher prices – a sign that the economy is holding up.
"It's a great growth economy," he said, noting that the economy had been strong under Biden too. He said he saw Trump's decision to quickly offer relief from his new tariffs as a sign of a business-friendly president adjusting to the "business reality".
Others were more worried that the back-and-forth would cause economic damage.
"I think we're going to have a recession before whatever succeeds in the future," one investment manager said. "You're going to get the bad before you get the good."