The Trump administration has suspended tariffs on USMCA goods from Canada and Mexico, giving businesses a temporary reprieve from the trade war.
The Trump administration has suspended many of the tariffs imposed on goods from Canada and Mexico, giving a reprieve to businesses that depend on trade with these countries. The decision came after President Trump abruptly reversed his earlier move to impose sweeping tariffs on two of America’s largest trading partners.
The United States-Mexico-Canada Agreement (USMCA) tariff hike refers to the increase in tariffs on certain goods traded between the three countries.
The agreement, which replaced NAFTA in 2020, sets out rules for trade and investment among its member states.
Tariff hikes under USMCA are typically implemented due to unfair trade practices or national security concerns.
For instance, in 2020, the US imposed a 10% tariff on Canadian aluminum imports, citing national security reasons.
The impact of USMCA tariff hikes can be significant for businesses and consumers, leading to higher prices and reduced trade volumes.
The suspension effectively abandons many of the tariffs that Mr. Trump had placed on Canadian and Mexican products, which were imposed just days ago under the guise of stemming the flow of drugs and migrants into the United States. The ‘We’re going to give it a shot,’ president said he would allow products traded under the rules of the U.S.-Mexico-Canada Agreement (USMCA) to avoid the stiff 25 percent tariffs.
In March 2018, President Donald Trump imposed tariffs on steel and aluminum imports from major trading partners, including Canada, Mexico, China, and the European Union.
The tariffs were set at 25% for steel and 10% for aluminum.
This move was part of Trump's 'America First' trade policy aimed at protecting American industries and jobs.
However, the tariffs sparked a global trade war, with other countries retaliating with their own tariffs on US goods.
The impact of these tariffs is still being felt, with many industries experiencing increased costs and decreased exports.
The decision has sent mixed signals to financial markets, which have been jittery since Mr. Trump ratcheted up his trade war earlier this week. Despite the reprieve, many economists warn that tariffs could lead to prices rising for consumers in the US, while triggering severe economic downturns in Mexico and Canada.
It’s worth noting that Mr. Trump has not suspended any of his levies on China, which were imposed earlier this week as part of a broader trade war with Beijing. The additional 10 percent tariff on all Chinese imports remains in effect, prompting another round of retaliation from Beijing on American products.
In 2018, President Donald Trump imposed tariffs on Chinese goods worth $50 billion to address intellectual property theft and technology transfers.
The tariffs were initially set at 25% but later reduced to 7.5%.
China retaliated with its own tariffs on US goods.
The trade war escalated in 2019, with the US imposing additional tariffs on Chinese goods.
The tariffs had significant economic impacts, including higher prices for consumers and decreased exports.
The trade tensions were eventually resolved through a phase-one agreement in January 2020, which included commitments from China to increase purchases of US agricultural products.
The ongoing trade tensions have raised fears of economic turbulence and rattled markets worldwide. The S&P 500 share index ended down nearly 1.8% on Thursday, while ‘the hokey cokey’ with Trump’s tariffs has made it ‘nigh on impossible’ for firms to manage their production lines, according to George Godber, fund manager at Polar Capital.
The decision to suspend tariffs has been met with relief by some businesses, but others remain skeptical. A pause on some tariffs means nothing, said Ontario Premier Doug Ford, while Treasury Secretary Scott Bessent dismissed retaliation as counter-productive for trade negotiations.
Goods worth billions cross the borders of the US, Canada, and Mexico each day, and the economies of these countries are deeply integrated after decades of free trade. The impact of tariffs on the economy is already being felt, with imports spiking in January on the back of tariff fears and America’s trade deficit increasing 34% to more than $130bn.
The Trump administration’s decision to suspend tariffs on USMCA goods from Mexico and Canada has provided a temporary reprieve for businesses that depend on trade with these countries. However, the ongoing trade tensions and uncertainty surrounding Mr. Trump’s policies continue to pose significant risks to the global economy.
