Trump temporarily exempts Mexican imports from tariffs, trade tensions escalate
Pranjal Chandra | Mar 07, 2025, 00:11 IST
( Image credit : TIL Creatives )
President Trump has delayed the implementation of 25% tariffs on most Mexican imports until April 2, amidst ongoing negotiations and concerns over the economic impact. The delay aims to push Mexico to take stronger action against fentanyl trafficking, with the threat of tariffs being used as leverage.
In a move that has sent shockwaves through global markets, President Donald Trump announced on Thursday that his administration will delay the implementation of 25% tariffs on most goods imported from Mexico until April 2. The announcement comes amid ongoing negotiations with Mexican officials and mounting pressure from businesses concerned about the economic fallout of steep import taxes.
The temporary exemption marks the second one-month postponement since Trump first unveiled the tariffs in early February, signaling the administration’s wavering approach to trade policy. Commerce Secretary Howard Lutnick, speaking to CNBC, confirmed that the delay will likely apply to all goods compliant with the United States-Mexico-Canada Agreement (USMCA), the trade deal that replaced NAFTA during Trump's first term. According to Lutnick, this exemption would cover more than half of all U.S. imports from Canada and Mexico.
A strategic retreat or tactical move?
Trump, known for his aggressive trade policies, framed the decision as part of broader negotiations with Mexico and Canada over border security and fentanyl trafficking.
“We are working hard, together, on the Border, both in terms of stopping Illegal Aliens from entering the United States and, likewise, stopping Fentanyl,” Trump stated on Truth Social.
While Trump’s message emphasized cooperation, the delay raises questions about the administration’s true objectives. Analysts suggest that the White House may be using the threat of tariffs as leverage to pressure Mexico into taking stronger action against the fentanyl crisis—an issue that has been a focal point of Trump’s campaign rhetoric.
Markets react as uncertainty looms
The announcement had an immediate impact on financial markets, which rebounded from earlier lows as traders welcomed the reprieve. However, business leaders remain wary of the administration’s unpredictable stance. The back-and-forth nature of Trump's trade policy has left companies hesitant to make long-term investment decisions, with some delaying hiring and expansion plans until they have more clarity on the situation.
Lutnick sought to reassure investors by indicating that while tariffs on Mexico are currently paused, the administration still plans to enforce reciprocal tariffs on countries that impose duties on U.S. exports. These tariffs, he confirmed, are set to take effect on April 2, adding yet another layer of uncertainty to international trade relations.
Canada prepares for long-term trade conflict
Meanwhile, Canadian Prime Minister Justin Trudeau responded cautiously, acknowledging the temporary pause as a “promising sign” but warning that Canada is preparing for a prolonged trade standoff.
“The tariffs remain in place and therefore our response will remain in place,” Trudeau said, indicating that Canada will continue implementing countermeasures against U.S. goods. Canadian officials have been vocal in their opposition to Trump's tariffs, with some provinces already enacting retaliatory measures, including the removal of American liquor products from store shelves.
Fentanyl crisis: a key factor in trade talks
The Trump administration has linked its trade policy to efforts to combat fentanyl trafficking, using economic pressure to push Mexico and Canada into stricter enforcement measures.
“If Mexico and Canada don’t make enough progress limiting the shipment of fentanyl into the United States, the 25% tariffs could be re-applied next month,” Lutnick warned.
Administration officials have suggested that a decline in U.S. fentanyl overdose deaths will be a key metric in determining whether Mexico and Canada have done enough to curb the crisis. While some experts argue that tariffs are an ineffective tool for addressing drug trafficking, Trump has doubled down on his stance, portraying the issue as both a public health emergency and a national security threat.
Diplomatic talks continue
Trump is expected to hold further discussions with Mexican President Claudia Sheinbaum later on Thursday, with the possibility of additional announcements following their conversation. While Mexico has signaled willingness to cooperate, officials in Sheinbaum’s administration have strongly condemned the tariffs, warning that they could damage economic ties between the two nations.
For now, businesses, investors, and policymakers alike are left navigating an unpredictable trade landscape, with April 2 looming as a crucial deadline. Whether Trump ultimately follows through with his tariff threats or continues to use them as a bargaining chip remains to be seen, but one thing is certain: U.S. trade relations with its North American neighbors are at a critical crossroads.
The temporary exemption marks the second one-month postponement since Trump first unveiled the tariffs in early February, signaling the administration’s wavering approach to trade policy. Commerce Secretary Howard Lutnick, speaking to CNBC, confirmed that the delay will likely apply to all goods compliant with the United States-Mexico-Canada Agreement (USMCA), the trade deal that replaced NAFTA during Trump's first term. According to Lutnick, this exemption would cover more than half of all U.S. imports from Canada and Mexico.
A strategic retreat or tactical move?
Trump, known for his aggressive trade policies, framed the decision as part of broader negotiations with Mexico and Canada over border security and fentanyl trafficking.
“We are working hard, together, on the Border, both in terms of stopping Illegal Aliens from entering the United States and, likewise, stopping Fentanyl,” Trump stated on Truth Social.
While Trump’s message emphasized cooperation, the delay raises questions about the administration’s true objectives. Analysts suggest that the White House may be using the threat of tariffs as leverage to pressure Mexico into taking stronger action against the fentanyl crisis—an issue that has been a focal point of Trump’s campaign rhetoric.
Markets react as uncertainty looms
The announcement had an immediate impact on financial markets, which rebounded from earlier lows as traders welcomed the reprieve. However, business leaders remain wary of the administration’s unpredictable stance. The back-and-forth nature of Trump's trade policy has left companies hesitant to make long-term investment decisions, with some delaying hiring and expansion plans until they have more clarity on the situation.
Lutnick sought to reassure investors by indicating that while tariffs on Mexico are currently paused, the administration still plans to enforce reciprocal tariffs on countries that impose duties on U.S. exports. These tariffs, he confirmed, are set to take effect on April 2, adding yet another layer of uncertainty to international trade relations.
Canada prepares for long-term trade conflict
Meanwhile, Canadian Prime Minister Justin Trudeau responded cautiously, acknowledging the temporary pause as a “promising sign” but warning that Canada is preparing for a prolonged trade standoff.
“The tariffs remain in place and therefore our response will remain in place,” Trudeau said, indicating that Canada will continue implementing countermeasures against U.S. goods. Canadian officials have been vocal in their opposition to Trump's tariffs, with some provinces already enacting retaliatory measures, including the removal of American liquor products from store shelves.
Fentanyl crisis: a key factor in trade talks
The Trump administration has linked its trade policy to efforts to combat fentanyl trafficking, using economic pressure to push Mexico and Canada into stricter enforcement measures.
“If Mexico and Canada don’t make enough progress limiting the shipment of fentanyl into the United States, the 25% tariffs could be re-applied next month,” Lutnick warned.
Administration officials have suggested that a decline in U.S. fentanyl overdose deaths will be a key metric in determining whether Mexico and Canada have done enough to curb the crisis. While some experts argue that tariffs are an ineffective tool for addressing drug trafficking, Trump has doubled down on his stance, portraying the issue as both a public health emergency and a national security threat.
Diplomatic talks continue
Trump is expected to hold further discussions with Mexican President Claudia Sheinbaum later on Thursday, with the possibility of additional announcements following their conversation. While Mexico has signaled willingness to cooperate, officials in Sheinbaum’s administration have strongly condemned the tariffs, warning that they could damage economic ties between the two nations.
For now, businesses, investors, and policymakers alike are left navigating an unpredictable trade landscape, with April 2 looming as a crucial deadline. Whether Trump ultimately follows through with his tariff threats or continues to use them as a bargaining chip remains to be seen, but one thing is certain: U.S. trade relations with its North American neighbors are at a critical crossroads.