Suspension of tariffs: Trump opens dialogue with Canada and Mexico

A trade war on hold

On Saturday, February 1, President Donald Trump announced the implementation of 25% tariffs on imports from Canada and Mexico. This decision sparked strong reactions from the two U.S. partners within the North American free trade agreement (USMCA). In response, Ottawa and Mexico City had threatened to impose similar retaliatory measures.

Amid rising tensions, Donald Trump ultimately decided to suspend these tariffs for at least 30 days. The announcement was confirmed by Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum after discussions with the U.S. leader.

A deal in negotiation

According to Justin Trudeau, this suspension resulted from a “productive call” with Donald Trump. In return, Canada has committed to strengthening efforts against fentanyl trafficking by appointing a dedicated official and adding Mexican cartels to the list of terrorist entities. Additionally, a joint task force between the U.S. and Canada will be established to combat organized crime and money laundering.

Mexico, for its part, has agreed to reinforce its northern border with 10,000 members of the National Guard to curb drug trafficking into the U.S., particularly fentanyl. In return, Washington has pledged to address arms trafficking into Mexico.

Global economic repercussions

Trump’s tariff announcement immediately triggered a plunge in financial markets. In Asia, the Nikkei in Tokyo dropped 2.66%, Seoul fell 2.52%, and Sydney declined 1.79%. In Europe, Paris lost 2.01%, Frankfurt 2.13%, and London 1.27%.

Although Trump has consistently argued that tariffs would be borne by foreign exporters rather than passed on to U.S. consumers, he acknowledged for the first time that American businesses and consumers could “suffer” from the effects of his protectionist policy.

A one-month reprieve before a final decision

On his social media platform, Truth Social, Donald Trump expressed his satisfaction with this first step. He stated that the 30-day period would allow time to assess whether a final economic agreement could be reached with Canada and Mexico.

As Canada and Mexico raise concerns about the potential impact of these tariffs on North American competitiveness, consumer prices, and millions of jobs, this temporary truce offers a brief respite in trade relations. The upcoming negotiations will be crucial in shaping the future of economic exchanges in the region.