Trump pares back Canada, Mexico tariffs in latest whipsaw on trade

The U.S. partially pulled back tariffs on some goods from Mexico and Canada after markets sank and companies lobbied President Trump, as the administration’s swerving trade-policy strained relations with allies and raised recession fears.

Trump gave America’s neighbors and biggest trading partners a one-month reprieve from 25% tariffs a range of goods, setting up another showdown for April 2. It was the second time in a month that Trump had retreated from tariffs on Mexico and Canada, highlighting the uncertainty of his trade policies as he also raises duties on Chinese goods and moves ahead with plans for broader tariffs imposed on a host of countries next month.

Thursday’s respite doesn’t end trade tensions in North America, though, and there are still goods that still will continue to be hit with new tariffs because they weren’t covered by the U.S., Mexico, Canada free-trade agreement, or USMCA U.S. officials said.

Canadian Prime Minister Justin Trudeau said Thursday Canada will likely be in a trade war with the U.S. “for the foreseeable future.“ Trudeau had called the tariffs a “dumb move” and held a call with Trump that The Wall Street Journal said was laced with yelling and profanity. Treasury Secretary Scott Bessent called the premier a “numbskull” whose tough approach with the president would only lead to more tariffs.

“Believe it or not, despite the terrible job he’s done for Canada, I think that Justin Trudeau is using the Tariff problem, which he has largely caused, in order to run again for Prime Minister,” Trump said in a post on his social-media site. Trudeau is stepping down in the coming days as his party elects a new leader.

The leader of Canada’s most populous province, Ontario, said a 25% export tax on electricity sold to New York, Michigan and Minnesota would take effect Monday and remain in place until Trump drops all tariff threats against Canada, including the potential April 2 snapback.

The delay in tariffs Thursday highlighted the apparent friendship between President Trump and Mexican President Claudia Sheinbaum; the U.S. border at Ciudad Juárez, Mexico.

“As I always say, you know, you touch a stove once, and you get burned, you don’t touch a stove again,“ Ontario Premier Doug Ford told reporters in Toronto. “The only deal is, Drop the tariffs unconditionally, sit down and let’s start moving on a new USMCA deal.“

A White House official said about half the imports from Mexico and 38% from Canada claim preferences under the USMCA, an agreement Trump negotiated in his first term that replaced the 1994 North American Free Trade Agreement. Independent experts at the analysis firm Trade Partnership Worldwide dispute those numbers, saying the actual amount of USMCA-compliant goods from Canada is higher. In any case, U.S. officials said tariffs will no longer apply to those goods, which include products such automobiles and agricultural goods that are staples for U.S. consumers.

About 40% of Canadian imports and a similar level of Mexican imports fell outside USMCA, but had passed through duty-free because the U.S. imposes no tariffs on those products regardless of the supplier country. Those imports include computers, medical equipment, phones, and beer.

Those goods will now face 25% tariffs, White House officials said. Companies never sought to comply with the USMCA rules because there was no tariff benefit associated with compliance.

Stocks dropped Thursday even after the White House announced the partial pullback of tariffs. Tech shares fell, the dollar weakened and recession fears weighed on financial stocks.

Trump imposed the tariffs after declaring a national emergency on both the northern and southern borders, saying the levies wouldn’t be lifted until Mexico and Canada ended the flow of fentanyl to the U.S. market and stopped illegal migration.

In recent weeks, border crossing from Mexico have reached historic lows, and Mexican officials sent 10,000 troops to the border and cracked down on drug cartels. Canadian officials have taken their own border measures, but have migration and drugs have never been a major problem on their border, raising questions about Trump’s rationale.

A White House official said Trump’s decision to grant the tariff reprieve came after meetings with the chief executives of Ford, GM and Stellantis, in which the auto companies committed to move supply chains back from Mexico and Canada to the U.S. The tariff exemptions won’t be retroactive, the White House said, meaning that any tariffs already paid since Tuesday won’t be refunded to companies.

The tariff whipsawing over the last few days has unnerved more than markets, with even some Republican senators calling on the White House on Thursday to “bring more clarity to their tariff strategy,” as Indiana Sen. Todd Young put it.

The White House’s justification for the tariff reprieve—the automaker supply chain commitments — added to the confusion Thursday among lawmakers who say they are unsure whether the tariffs are really aimed at combating fentanyl trafficking—the stated legal justification for the tariffs—or a tool for reshoring manufacturing, or another objective.

“Are our tariffs, for example, on Canada targeted at insufficient cooperation as it relates to fentanyl trafficking, insufficient funding of their military so they can do their part as a NATO member, non-tariff impediments to U.S. goods and services?” Young wondered aloud on Thursday. “Are they an effort to increase our domestic manufacturing capacity and create good jobs at home? Are they some combination thereof? What combination and to what degree of those are the most important?”

The financial markets would “value this information immeasurably,” Young added, saying that he has heard from “very strong conservatives—farmers, manufacturers, and good working people around the state of Indiana — [who are] asking these questions.”

While Young was the most direct in his “encouragement” toward the White House to clarify its tariff strategy, it was clear other Senate Republicans were also puzzled. “This is fog of war,” said Missouri Sen. Josh Hawley. “I don’t know what’s going on behind the scenes, but we will all know in due course.”

To Democrats, the changing policies amounted to another indication that the White House’s tariff moves aren’t actually about combating the drug trade, and instead are an excuse to spark a continental trade war to hit out at Trudeau—whom Trump personally dislikes—and score domestic political points with the Republican base.

“This ain’t about fentanyl in Canada, it’s just a personality battle,” Sen. Tim Kaine (D., Va.), who this week introduced legislation to terminate Trump’s emergency order that underpins the tariffs. Kaine earlier called the fentanyl issue “a fig leaf to gather a whole lot of dough in a bucket, and to combine it with the ‘savings’ from axing all these federal employees, and then to give it all away in tax cuts.”

The delay in tariffs highlighted another moment of friendship between Trump and Mexican President Claudia Sheinbaum, whose popularity has soared in Mexico over her handling of the crisis brought on by the tariff threats.

In a phone call between the two leaders Thursday, Sheinbaum said Trump began the conversation by saying he wanted to keep unilateral tariffs on Mexican goods. Sheinbaum countered with how much Mexico had cooperated with the U.S., extraditing 29 imprisoned drug kingpins wanted by American prosecutors.

“I told him: President Trump, we are having results,” she said during her daily news conference. “But now that you have imposed tariffs, how are we going to continue collaborating with something that harms Mexico?“ Sheinbaum said she told Trump.

In a social-media post, Trump said: “I did this as an accommodation, and out of respect for President Sheinbaum. Our relationship has been a very good one, and we are working hard, together, on the Border, both in terms of stopping Illegal Aliens from entering the United States and, likewise, stopping Fentanyl.”