Natalie Sherman & Michael Race
BBC Business reporters
Watch: Trump signs order pausing some Mexico and Canada tariffs
US President Donald Trump has signed orders significantly expanding the goods exempted from his new tariffs on Canada and Mexico that were imposed this week.
It is the second time in two days that Trump has rolled back his taxes on imports from the US’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 levies just a day after they came into effect.
Mexican President Claudia Sheinbaum thanked Trump for the move, while Canada’s finance minister said the country would in turn hold off on its threatened second round of retaliatory tariffs on US products.
Canadian Prime Minister Justin Trudeau said on Thursday morning he had had a “colourful” conversation about tariffs in a phone call with Trump.
The US president used profane language more than once during Wednesday’s heated exchange, according to US and Canadian media reports.
Trudeau told reporters that a trade war between the two allies was likely for the foreseeable future, despite some targeted relief.
“Our goal remains to get these tariffs, all tariffs removed,” he said.
Sheinbaum said 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.
The carveout from the duties applies to goods shipped under North America’s free trade pact, the US-Mexico-Canada agreement (USMCA) , which Trump signed during his first term.
Items that currently come into the US under the pact’s rules include televisions, air conditioners, avocados and beef, according to analysis by the firm Trade Partnership Worldwide.
The measures also reduced tariffs on potash – a key ingredient for fertiliser needed by US farmers – from 25% to 10%.
A White House official said about 50% of US imports from Mexico and 62% from Canada may still face tariffs. Those proportions could change as firms change their practices in response to the order.
The White House has also continued to promote its plans for other tariffs, promising action on 2 April, when officials have said they will unveil recommendations for tailored “reciprocal” trade duties on countries around the world.
The trade war tensions have rattled markets and raised fears of economic turbulence.
The S&P 500 share index, which tracks the biggest listed American companies, ended down nearly 1.8% on Thursday.
George Godber, fund manager at Polar Capital, said the “hokey cokey” with Trump’s tariffs has it made it “nigh on impossible” for firms to manage their production lines and is “putting pressure on the US economy”.
Meanwhile, he said it is “galvanising a response from Europe, especially Germany, so we’ve seen a more positive reaction to European markets”.
In signing the orders, Trump dismissed the suggestion that he was walking back the measures because of concerns about the stock market.
“Nothing to do with the market,” Trump said. “I’m not even looking at the market, because long term, the United States will be very strong with what’s happening.”
‘Numbskull’
Ontario Premier Doug Ford, who leads Canada’s most populous province, said afterwards that “a pause on some tariffs means nothing”.
Earlier, as relief looked likely but before it was announced, he 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.
“Honestly, it really bothers me. We have to do this, but I don’t want to do this,” he said.
Treasury Secretary Scott Bessent on Thursday dismissed retaliation as counter-productive for trade negotiations.
“If you want to be a numbskull like Justin Trudeau and say, ‘Oh we’re going to do this’, then tariffs are probably going to go up,” he said during a question-and-answer session after a speech at the Economic Club of New York on Thursday.
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 say tariffs could lead to prices rising for consumers in the US, while warning they could trigger severe economic downturns in Mexico and Canada.
About $1bn in trade enters the US from Mexico and Canada each day that does not claim duty-free exemptions under USMCA, since it has historically enjoyed low or no tariffs, said Daniel Anthony, president of Trade Partnership Worldwide.
“Whether importers can or will start claiming USMCA remains to be seen, but it’s a huge amount of money at stake,” he said.
In the US, the economy is already starting to show the effects of the disruption from Trump’s policies.
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.
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.
But Mr Brown, who attended Mr Bessent’s speech, 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”.
