Changes in US Tariff Policy
The delay applies to automobiles and all goods that qualify for duty-free trade under the United States-Mexico-Canada Agreement (USMCA). This decision significantly eases trade pressure on Canada and Mexico, covering approximately 38% of imports from Canada and 50% from Mexico.
However, Canadian energy products, which are not covered under USMCA, will still be subject to a 10% tariff instead of the 25% applied to other goods.
Reasoning Behind the Tariffs
The Trump administration claims that these tariffs are a response to a "national emergency" linked to the flow of fentanyl into the US from Canada and Mexico. Commerce Secretary Howard Lutnick stated that the tariffs could be fully reviewed on April 2, depending on whether the two countries effectively address this issue.
"Reciprocal Tariffs" Expected in April
Beyond the fentanyl issue, Trump plans to introduce "reciprocal tariffs" on all trading partners based on an assessment of tariff and non-tariff barriers faced by American goods abroad.
Although Canada and Mexico do not impose tariffs on most US goods under USMCA, the Trump administration may justify new tariffs based on other trade restrictions, including:
- Canada’s dairy import quotas
- Mexico’s restrictions on foreign investment in its energy sector
Tariff Exemption for Potash Fertilizers
One relief for US farmers was Trump’s decision to remove tariffs on potash fertilizers, which are primarily imported from Canada. This move was driven by concerns over rising fertilizer prices due to the war in Ukraine and sanctions on Russian exports.
Reactions from Canada and Mexico
Mexican President Claudia Sheinbaum welcomed the agreement, confirming that Mexico will not be required to pay tariffs on goods under USMCA until April 2.
However, Trump has not made a similar commitment regarding Canada and continues to criticize Prime Minister Justin Trudeau on social media.
What’s Next?
On April 2, the US is set to introduce new "reciprocal tariffs," which could significantly reshape trade relationships worldwide. The situation remains uncertain, and upcoming negotiations will play a crucial role in determining the future of US tariff policy.
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