WASHINGTON/MEXICO CITY/OTTAWA, March 6 (Reuters) – Goods from Mexico covered by a North American trade pact will be exempted for a month from the 25% tariffs that Donald Trump imposed earlier this week, the U.S. president said on Thursday, while making no mention yet of a comparable reprieve for Canada.
In the latest of a jarring stream of events around U.S. trade policy as Trump has threatened, imposed and then in some cases temporarily removed a raft of import taxes on major trading partners, the president offered another one-month suspension of duties for Mexico after a phone call with Mexico’s president.
“After speaking with President Claudia Sheinbaum of Mexico, I have agreed that Mexico will not be required to pay Tariffs on anything that falls under the USMCA Agreement,” Trump wrote on Truth Social. “This Agreement is until April 2nd,” when he has threatened to impose a global regime of reciprocal tariffs on all U.S. trading partners.
“We had an excellent and respectful call in which we agreed that our work and collaboration have yielded unprecedented results, within the framework of respect for our sovereignties,” Sheinbaum said in a post on X.
Sheinbaum said both countries would continue working together to stem the arrival of the opioid fentanyl from Mexico into the United States, a key point of contention in negotiations over Washington’s 25% tariffs on Mexican imports.
The development comes a day after Trump exempted automotive goods from the 25% tariffs he imposed on imports from Canada and Mexico as of Tuesday, levies that economists saw as threatening to stoke inflation and stall growth across all three economies.
Trump, however, made no mention of a parallel suspension for Canada, despite U.S. Commerce Secretary Howard Lutnick earlier saying a reprieve for all imports that comply with the U.S.-Mexico-Canada Agreement on trade that Trump negotiated in his first term.
Lutnick told CNBC he expected Trump to announce such an extension on Thursday.
“So if you think about it this way, if you lived under Donald Trump’s US-Mexico-Canada agreement, you will get a reprieve from these tariffs now. If you chose to go outside of that, you did so at your own risk, and today is when that reckoning comes,” he said.
RECIPROCAL LEVIES STILL COMING
U.S. stocks resumed their recent sell off on Thursday after the Wednesday reprieve for automotive goods made under USMCA rules briefly helped steady markets that have been whipsawed by Trump’s breakneck pace of policy pronouncements, on trade in particular.
The S&P 500 index was down 1.8% at its lowest since Trump’s election victory on Nov. 5. The index has fallen 6.5% since touching a record high in mid-February, with investors voicing increasing concern that tariffs might aggravate inflation that is already proving hard to fully contain, and slow demand and growth in its wake.
The Mexican peso was slightly firmer against the dollar, while the Canadian dollar gave back some of its earlier gains.
“A continuation of this on again, off again with tariffs particularly with Mexico and Canada” is what is creating uncertainty in markets, said Bill Sterling, global strategist at GW&K Investment Management in Boston.
“The rational economic response to business leaders when there’s such a high degree of uncertainty is to sit on their hands and just defer making decisions,” Sterling said. “How can you make decisions about where you locate an auto plant between the U.S. and Canada right now?”
Lutnick said his “off the cuff” estimate was that more than 50% of the goods imported from the two U.S. neighbors – also its largest two trading partners – were compliant with the USMCA, though Sheinbaum said “practically all” trade with the U.S. falls under USMCA.
Canadian Prime Minister Justin Trudeau called Lutnick’s comments “promising” in remarks to reporters in Canada.
“That aligns with some of the conversations that we have been having with administration officials, but I’m going to wait for an official agreement to talk about Canadian response and look at the details of it,” Trudeau said. “But it is a promising sign. But I will highlight that it means that the tariffs remain in place, and therefore our response will remain in place.”
Lutnick emphasized that the reprieve would only last until April 2, when he said the administration plans to move ahead with reciprocal tariffs under which the U.S. will impose levies that match those imposed by trading partners.
In the meantime, he said, the current hiatus is about getting fentanyl deaths down, which is the initial justification Trump used for the tariffs on Mexico and Canada and levies on Chinese goods that have now risen to 20%.
“On April 2, we’re going to move with the reciprocal tariffs, and hopefully Mexico and Canada will have done a good enough job on fentanyl that this part of the conversation will be off the table, and we’ll move just to the reciprocal tariff conversation,” Lutnick said. “But if they haven’t, this will stay on.”
Indeed, Trudeau is expecting the U.S. and Canada to remain in a trade war.
“I can confirm that we will continue to be in a trade war that was launched by the United States for the foreseeable future,” he told reporters in Ottawa.
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Reporting By Katharine Jackson in Washington, Kylie Madry and Brendan O’Boyle in Mexico City, David Ljunggren in Ottawa and Dan Burns in New York; Editing by Chizu Nomiyama and Alistair Bell
Our Standards: The Thomson Reuters Trust Principles.
Kylie Madry is a headline news reporter covering business, politics and breaking news for all of Latin America. She’s based out of the Reuters office in Mexico City, where she was previously a freelance journalist and translator working on award-winning podcasts, books about Mexico’s drug lords and stories ranging from the fight for clean water to the millions spent on the city’s surveillance system. Kylie is originally from Dallas, Texas.
Covers Canadian political, economic and general news as well as breaking news across North America, previously based in London and Moscow and a winner of Reuters’ Treasury scoop of the year.
