Bota Posted on 2025-02-04 10:01:00

Trump halts tariffs on Mexico and Canada - Negotiations on border security measures expected!

From Edel Strazimiri

Trump halts tariffs on Mexico and Canada - Negotiations on border security

US President Donald Trump has agreed to halt his threatened tariffs on Mexico and Canada for 30 days after the two countries agreed to take steps to strengthen their border security and crack down on drug trafficking.

The pauses provide a period of calm after a turbulent few days that put North America on the brink of a trade war that could have crushed economic growth, sent prices soaring and ended two of the United States' most critical partnerships.

"The proposed tariffs will be suspended for at least 30 days while we work together," Canadian Prime Minister Justin Trudeau tweeted Monday afternoon on X, saying his government would appoint a fentanyl czar, list Mexican cartels as terrorist groups and launch a "Canada-U.S. Joint Striking Force to combat organized crime, fentanyl and money laundering."

The White House confirmed the pause for the United States, which followed a similar move with Mexico allowing a period of negotiations over drug smuggling and illegal immigration.

On Saturday, Trump imposed 25% tariffs on imports from Mexico and Canada, with another 10% tariff on Canadian oil, natural gas and electricity. He also ordered an additional 10% tax on imports from China. The 10% tariff that Trump ordered on China is still set to take effect, although Trump planned to speak with Chinese President Xi Jinping in the coming days.

Trump's signing of tariff orders on the three countries has raised alarm among investors, lawmakers, businesses and consumers. The import taxes, if maintained, could raise prices and sabotage growth, even though Trump has suggested they are necessary to get other countries to stop illegal immigration, prevent fentanyl smuggling and treat the United States, in his mind, with respect.

But Trump and Mexican President Claudia Sheinbaum announced a month-long pause on slapping tariffs on each other after what Trump described on social media as a "very friendly conversation," and he said he looked forward to future talks.

"I look forward to participating in those negotiations, with President Sheinbaum, as we work to reach a 'deal' between our two countries," the president said on social media. Trump said the talks would be led by U.S. Secretary of State Marco Rubio, Treasury Secretary Scott Bessent, Commerce Secretary nominee Howard Lutnick and high-level representatives from Mexico.

Sheinbaum said she was reinforcing the border with 10,000 members of her country's National Guard and that the US government would commit "to working to stop the trafficking of high-powered weapons into Mexico."

In 2019, when Mexico also dodged tariffs from the Trump administration, the government announced it would send 15,000 troops to its northern border. But the outlook was different for Canada for most of Monday, but a deal was reached later in the day.

A senior Canadian official said Canada was not convinced it could avoid potential tariffs like Mexico did because Canada feels the Trump administration is shifting its demands to Canada more than to Mexico. Asked Monday afternoon what Canada could offer in talks to prevent tariffs, Trump told reporters gathered in the Oval Office: "I don't know."

The US president also indicated that more import tariffs could be coming against China: "If we can't make a deal with China, then the tariffs will be very, very significant." White House press secretary Caroline Leavitt told reporters that Trump would speak with Chinese President Xi Jinping in the next two days and that the White House would provide a report on the discussion.

Trump has continued to antagonize Canada in recent weeks. He used a Monday social media post to repeat his complaints that Canada has not been cooperative, despite decades of friendship and partnership ranging from World War II to the response to the September 11 terrorist attacks.

"Canada doesn't even allow American banks to open or do business there," Trump tweeted. " What's this all about? Lots of that, but it's also a DRUG WAR, and hundreds of thousands of people have died in the US from drugs flowing across the Mexican and Canadian borders ." He also went on to discuss the possibility of Canada becoming the 51st US state.

Markets down after Trump tariffs

The threat of a trade war between the United States and its two largest trading partners sent Wall Street into chaos on Monday. But after initially falling sharply, U.S. stocks pared their losses after Mexico said it had negotiated a one-month reprieve on tariffs.

The S&P 500 ended down 0.8% as Asian and European indexes posted the worst declines. The Dow Jones Industrial Average lost 122 points, or 0.3%, and the Nasdaq composite sank 1.2%. Some of the heaviest losses hit Big Tech and other companies that could be hurt the most by higher interest rates that could result from U.S. tariffs.

The fear hanging over Wall Street is that it could raise prices for groceries, electronics and all sorts of other bills for American families, adding to rising pressure on a U.S. inflation rate that has largely slowed since its peak three summers ago.

Stubbornly high or accelerating inflation could prevent the Federal Reserve from cutting interest rates, which it began doing in September, to give the U.S. economy a boost. Earnings for U.S. companies, meanwhile, could face downward pressure from slowing global trade.

Much of Wall Street had hoped that Trump's talk of tariffs during the presidential campaign was just that, a conversation and a starting point for negotiations with U.S. trading partners rather than a permanent policy. Monday's twists in Mexico and Canada leave open the question of whether Trump is simply using tariffs as a bargaining chip.

There is a risk that the tariffs will still go into effect, leaving the global economy uncertain whether a crisis has been averted or whether a potential catastrophe could still come in the coming weeks. Even if the orders focus on illegal drugs, Trump's own remarks have often been more about his perceived sense that foreign countries are undermining the United States by creating trade surpluses.

On Sunday, Trump said tariffs would be coming soon to countries in the European Union. He has discussed tariffs as a diplomatic tool for national security issues, a way to raise revenue and a means of renegotiating existing trade pacts.

Many economists outside the administration have warned that the tariffs will raise prices and hamper growth, with Trump himself saying there would be some short-term pain after campaigning last year on the promise that he could tame inflation.

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