The decision is a significant reversal by Trump, who on Tuesday had announced the largest tariff increase in a century only to back down 48 hours later
“Hopefully Mexico and Canada will have done a good enough job on fentanyl that this part of the conversation will be off the table” when the new tariffs kick in, Lutnick said in a statement.
Automobiles and parts that meet USMCA requirements, will be among the products exempt from the tariffs. Canadian potash used heavily in fertilizers for U.S. agricultural producers is expected to face a lower, 10 per cent duty. The White House estimates that 62 per cent of Canadian imports will still be subject to the tariffs, most of which are energy products that are being tariffed at a 10 per cent rate, and half of goods coming from Mexico. A White House official cautioned those proportions could change as importers rush to comply with the new rules.
The decision is a significant reversal by Trump, who on Tuesday had announced the largest tariff increase in a century only to back down 48 hours later as stocks were hammered and Republicans expressed concern about the economic consequences.
The president downplayed the market reaction, saying that foreign countries are “ripping us off” and that the tariffs would put the U.S. on a stronger footing.
“There’ll always be a little short-term interruption. I don’t think it’s going to be big,” Trump said.
Exempting automobiles from the tariffs was done in order to minimize disruption to the industry and auto workers, according to the White House official. The U.S., Mexico and Canada have a deeply integrated auto supply chain and Detroit’s Big Three car companies had lobbied the administration for weeks for a carve out. It is appropriate to adjust the tariffs being imposed on articles of Canada/Mexico.
Trump decided to pare back the tariffs after speaking to Mexican President Claudia Sheinbaum, Canadian Prime Minister Justin Trudeau and auto company executives.
Lutnick telegraphed the decision earlier Thursday, saying Trump was weighing an exemption for both Mexican and Canadian goods under the agreement. Lutnick said on CNBC that both Mexico and Canada “offered us an enormous amount of work on fentanyl.” The president has tied the tariffs, as well as a 20 per cent duty on China, to commitments by the other three companies to crack down on the flow of illicit drugs and migration into the U.S.
‘Showing Results’
Sheinbaum at a press conference on Thursday said she outlined Mexico’s security efforts, including measures to stop fentanyl trafficking, during her call with Trump.
“I told him, we’re showing results,” she told reporters. “I told him that I understood his concern about the U.S. deficit, but that it was better to continue working together and having a dialogue.”
The Mexican president also said she warned Trump that if the tariffs remained in place she would have been forced to respond. The delay until April made such retaliatory actions unnecessary, she added.
“We were treated with a great deal of respect,” Sheinbaum said.
The U.S. president previously offered a one-month exemption to automobiles covered by USMCA, and administration officials were considering exempting certain agricultural imports, before going ahead with broader relief.
The development is the latest in a frenzied week that saw Trump apply across-the-board 25 per cent tariffs on Canada and Mexico, with the exception of Canadian energy, which faced a 10 per cent rate. He also doubled his recent tariff on China to 20 per cent from 10 per cent.
That sparked a furious push back, including a round of retaliatory tariffs from Canada on U.S. goods.
—With assistance from Maya Averbuch and Skylar Woodhouse.