A pause has emerged in the trade wars: the 47th President of the United States Donald Trump has agreed to suspend the imposition of tariffs on imports from Mexico and Canada for a month, following agreements from both neighboring countries to take measures to strengthen border security and combat drug trafficking.
"The proposed tariffs will be suspended for at least 30 days while we work together," Prime Minister of Canada Justin Trudeau wrote on the platform X on Monday afternoon, announcing that his government will appoint a coordinator to combat fentanyl trafficking, include Mexican cartels on the list of terrorist organizations, and launch "Canadian-American joint task forces to combat organized crime, drug trafficking, and money laundering."
Ottawa will allocate $1.3 billion to implement a plan that involves deploying 10,000 soldiers along the U.S.-Canada border.
In support of "de-escalation" in relations with Washington and the troop placement at the border, as well as at various airports in Canada, Trudeau was encouraged by the leader of the Conservative opposition Pierre Poilievre, along with heads of certain Canadian provinces, including Premier of Saskatchewan Scott Moe.
On Saturday, Trump imposed 25% tariffs on imports from Mexico and Canada, as well as 10% tariffs on Canadian oil, natural gas, and electricity. He also ordered an additional 10% tax on imports from China.
The new tariffs against Beijing have not yet come into effect, and the White House plans to hold talks with Chinese President Xi Jinping in the coming days.
Trump's signing of tariff orders for the three countries raised concerns among investors, lawmakers, entrepreneurs, and consumers. If the tariffs remain in place, they could lead to rising prices and undermine economic growth, despite Trump's belief that they are necessary to compel other countries to stop illegal immigration, prevent fentanyl smuggling, and treat the U.S. with "respect."
The month-long reprieve was first agreed upon by Trump and Mexican President Claudia Sheinbaum following a conversation that Trump described on social media as a "very friendly discussion," and he expressed eagerness for full negotiations.
"I look forward to participating in these negotiations alongside President Sheinbaum as we attempt to reach a 'deal' between our two countries," the White House chief wrote on social media.
According to Trump, negotiations will be led by U.S. Secretary of State Marco Rubio, Secretary of the Treasury Scott Bessent, nominee for Secretary of Commerce Howard Lutnik, and senior representatives from Mexico.
Sheinbaum stated that border security will be bolstered by 10,000 National Guard troops and that the U.S. government is committed to "working to stop the illegal arms trade in Mexico."
In 2019, when the Mexican government also avoided tariffs from the Trump administration by announcing it would send 15,000 soldiers to the northern border of the country.
However, the outlook for Canada was different. A senior Canadian official said that Ottawa is uncertain whether it can avoid the impending tariffs as Mexico did, given that relations with the new U.S. administration are even more strained.
Responding on Monday afternoon to a question about what Canada could offer in negotiations to prevent the imposition of tariffs, Trump told reporters gathered in the Oval Office: "I don't even know."
The U.S. President also pointed to increased pressure on Beijing: "If we can't strike a deal with China, the tariffs will be very, very substantial."
White House Press Secretary Caroline Livitt informed reporters that Trump would speak with Chinese President Xi Jinping in the next couple of days and that the White House would provide a report on that conversation.
In recent weeks, Trump has continued to clash with Canada. On Monday, he reiterated his complaints on social media that Ottawa is not cooperating with him, despite "decades of friendship and partnership" dating back to World War II and the response to the September 11 terrorist attacks.
"Canada doesn't even allow American banks to open branches or do business there, – Trump lamented. – What is that? And there's a drug war going on, hundreds of thousands of people have died in the U.S. from drugs coming through Mexico and Canada."
He also continued to discuss the possibility of turning a larger part of Canada into "the 51st state of the USA."
Markets Fall After Trump Imposes Tariffs
A potential trade war could deal a serious blow to the integrated economies of the three North American countries, which have spent decades establishing free trade agreements. On Monday, news of the tariffs caused chaos on Wall Street.
However, after Mexico announced that it had agreed to delay the imposition of tariffs for a month, U.S. stocks were able to reduce their losses incurred from the initial sharp drop.
The S&P 500 index ultimately fell by 0.8%, while Asian and European indices declined even more significantly. The Dow Jones Industrial Average lost 122 points, or 0.3%, and the Nasdaq composite index dropped by 1.2%.
The biggest losses were suffered by technology companies and other firms that could be most affected by rising interest rates due to the imposition of U.S. tariffs.
Concerns looming over Wall Street are that this could impact households, lead to rising prices for food and electronics, and put pressure on the inflation rate in the U.S., which has generally slowed down since its peak three years ago.
Accelerating inflation could hinder the Federal Reserve from lowering interest rates, a process it began in September to stimulate the U.S. economy.
On Wall Street, there were hopes that Trump's comments about tariffs during the presidential campaign were merely electoral rhetoric aimed at initiating discussions with U.S. trading partners, rather than a permanent policy. The rollback regarding Mexico and Canada raises questions about whether Trump is using tariffs solely as a negotiation tool.
Even if these directives formally relate to combating drug trafficking, Trump's own statements often reflect his feeling that foreign states are "robbing" the United States by maintaining a positive trade balance.
Next Target – the EU?
Speaking in Washington on Sunday, Trump suggested that his next target could be the single market of the 27 countries comprising the European Union, but he did not specify when this would occur.
"They don't take our cars, they don't take our agricultural products. They take almost nothing, while we buy everything from them," he told reporters.
EU leaders at an informal summit in Brussels on Monday stated that Europe would be ready to retaliate if the U.S. imposes tariffs, but also called for "reasonableness" and cooperation.
German Chancellor Olaf Scholz stated that if necessary, the bloc could respond with its own tariffs, but emphasized that it is better for both sides to come to an agreement on trade issues.
The U.S. is the largest trading and investment partner of the EU. According to Eurostat data for 2023, the U.S. trade deficit with the EU in goods was €155.8 billion ($161.6 billion), which is offset by a surplus of €104 billion in services.
EU foreign policy chief Kaia Kallas stated that there are no winners in a trade war, and if one erupts between Europe and the U.S., "the only one who will be laughing on the sidelines will be China."