Trump backs off Mexico tariffs while Canada tensions simmer

Trump backs off Mexico tariffs while Canada tensions simmer

The US trade gap hit a new record in January, government data showed, as imports surged

Donald Trump said Thursday he was pausing some of the sweeping new tariffs on Mexican imports, amid continued trade tensions with Canada and sustained blowback from global markets on the US president's policies.

Trump said he would hold off some tariffs on Mexico, furthering a pullback in trade action a day after providing temporary reprieve for automakers.

The president said after a phone call with Mexican President Claudia Sheinbaum that fresh tariffs targeting Mexico would not apply to trade that falls under an existing regional pact between the United States, Mexico and Canada.

The pause, he said, was "until April 2nd." At that point, Canadian and Mexican goods could still face reciprocal levies.

"I did this as an accommodation, and out of respect for, President Sheinbaum. Our relationship has been a very good one," Trump said on his Truth Social platform.

His remarks stood in sharp contrast to the seething 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.

Global markets tumbled after Trump's announcement of 25 percent tariffs on US imports from Canada and Mexico took effect Tuesday and economists say Americans are likely to face broad-based price rises.

The United States' expanded reprieve for Mexico came a day after the White House gave automakers temporary relief too from the levies that hit everything from lumber to avocado imports.

- 'Economic reality' -

"It's a recognition of economic reality" that Trump walked back the 25 percent tariff on Mexico after implementation, said Scott Lincicome, vice president of general economics at the Cato Institute.

This is acknowledgement 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," he told AFP.

Lincicome added that the relief Trump's announcement brings to businesses depends on the details of his rollback.

Since taking office in January, Trump has made a series of tariff threats on allies and adversaries alike, declaring trade wars will be a key part of his foreign policy.

Trump justified the tariffs on the United States' two giant 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 United States' illicit 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.

Economists warn that blanket tariffs stand to weigh on US economic growth and raise inflation in the near-term.

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

The US trade deficit surged to a new record in January according to government data Thursday, as imports spiked while tariff worries flared in the month of Trump's inauguration.

The overall trade gap of the world's biggest economy ballooned 34 percent to $131.4 billion, on the back of a 10 percent jump in imports for the month, said the Commerce Department.

Analysts say the US deficit was likely bolstered by gold imports.

But "stripping out this impact, all other imports rose 5.5 percent, indicating front-loading of shipments was in full swing," said Oxford Economics senior economist Matthew Martin.

This refers to a tendency for businesses to try and get ahead of additional costs from potential tariffs, and possible supply chain disruptions.

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Originally published as Trump backs off Mexico tariffs while Canada tensions simmer