Trump pauses tariffs on Canada & Mexico

President Donald Trump’s trade policies have significantly impacted global commerce, with tariffs playing a central role in his economic strategy. While Trump recently announced a pause on certain tariffs for Canada and Mexico, many remain in effect, creating economic uncertainty.

Understanding Trump's Tariffs: A Complex Trade War

Trump’s tariff policy has been unpredictable, with multiple changes and exemptions adding to the confusion. The tariffs primarily target Canada, Mexico, and China, but also extend to steel, aluminum, and other sectors. While some tariffs are meant to address trade imbalances, others are imposed as a response to geopolitical issues such as illegal immigration and drug trafficking.

Despite the recent pause on tariffs affecting some Canadian and Mexican goods under the US-Mexico-Canada Agreement (USMCA), a large portion of imports from these countries remain subject to tariffs.

Trump's Tariff Timeline and Key Developments

1. Tariffs on Canada & Mexico

Initial Implementation: March 4, 2024 (Partial Delay to April 2)
Tariff Rate: 25% on select goods
Reasoning: Addressing illegal immigration and fentanyl trafficking into the United States

Trump first announced these tariffs as part of his broader trade policy, citing national security and economic concerns. Initially scheduled for April 2, they were moved up to March 4, leading to fluctuations in the Mexican peso and Canadian dollar.

Pause and Partial Exemptions

On March 6, Trump temporarily paused tariffs on certain goods from Canada and Mexico for one month.
The exemption applies only to goods covered under the USMCA.
The New York Times reported that only 38% of Canadian imports and 50% of Mexican imports benefit from this exemption.
Some Canadian goods, like potash (used in fertilizers), still face a 10% tariff.

2. Tariffs on China

First Implementation: February 4, 2024 (10% tariff)
Second Tranche: March 4, 2024 (Additional 10% tariff)
Total Tariff Rate: 20% on affected goods

China has been a major target of Trump’s tariff policies. The first wave of tariffs, 10% on Chinese imports, came into effect on February 4. An additional 10% tariff followed on March 4, bringing the total to 20%.

China’s Retaliatory Measures

China responded swiftly:

February 10: 15% tariff on US coal and liquefied natural gas (LNG)
March 10: 15% tariff on US chicken, wheat, corn, and cotton
March 10: 10% tariff on US soybeans, sorghum, pork, beef, seafood, fruits, vegetables, and dairy products
Export and Investment Restrictions: 25 US companies placed under restrictions

3. Tariffs on Steel and Aluminium

Implementation Date: March 12, 2024
Tariff Rate: 25% on all countries

Trump’s tariffs on steel and aluminum impact all countries, but Canada faces the most significant burden, as it is the largest exporter of these materials to the United States. These tariffs are in addition to the 25% Canada-specific tariffs already in place.

4. Reciprocal Tariffs

Potential Start Date: April 2, 2024
Purpose: To match tariffs imposed by other countries on US goods

Under this policy, the US will impose equal tariffs on any country that places tariffs on American products. These tariffs will be:

Country-specific, rather than universal
Focused on key industries, such as agriculture, automobiles, semiconductors, and pharmaceuticals

Before implementation:

The US Commerce Secretary is set to submit a report on global tariffs by April 1.
The US will likely enter negotiations with other nations to prevent a trade war.

5. Tariffs on the European Union (EU)

Proposed Rate: 25% on automobiles and other goods
Timeline: Not yet announced

Trump has been vocal about his dissatisfaction with the EU’s trade policies, claiming they put US manufacturers at a disadvantage. While he announced plans to impose tariffs, no specific implementation date has been provided.

6. Tariffs on Copper

Status: Under investigation
Timeline: No clear implementation date

Trump recently ordered an investigation into copper imports, hinting at possible future tariffs. The scope and timing remain uncertain, pending the findings of the investigation.

Impact of Trump's Tariffs on Global Trade

Trump’s trade policies have caused significant disruptions across various sectors:

Effects on the US Economy

Increased Costs for Consumers: Tariffs on steel, aluminum, and electronics raise prices on everyday goods.
Impact on Farmers: China’s retaliatory tariffs on soybeans, corn, and pork directly hurt American farmers.
Manufacturing Challenges: Automakers and electronics manufacturers face higher production costs due to increased tariffs on raw materials.

Effects on Global Markets

Uncertainty for Investors: Fluctuating tariff timelines create volatility in global markets.
Impact on Canada & Mexico: Limited exemptions under USMCA mean continued economic strain for these trade partners.
Rising Trade Tensions: Countries may impose their own retaliatory tariffs, escalating trade conflicts.

The Uncertain Future of US Trade Policy

Trump’s tariffs have reshaped global trade, affecting multiple industries and economies. While some tariffs have been paused or delayed, many remain in effect, and new tariffs continue to be proposed. With ongoing investigations and potential trade negotiations, the future of US trade policy remains uncertain.

Businesses and investors must stay informed about the latest developments to navigate the challenges posed by these evolving trade restrictions.

With inputs from agencies

Image Source: Multiple agencies