Trump Softens Tariff Rules for Canada and Mexico, But Trade War Still Looms – BBC Reports
U.S. President Donald Trump has decided to loosen some of the tough tariffs he recently placed on Canada and Mexico, according to BBC. This is the second time in two days that Trump has stepped back from his strict trade rules, which had made businesses uneasy and caused financial markets to dip.
On Wednesday, BBC noted that Trump had already announced a temporary break for carmakers from the new 25% tax on imported cars, just one day after putting the rule in place. Now, he has gone a step further by expanding the list of goods that won’t face tariffs.
Mexican President Claudia Sheinbaum thanked Trump for this decision, while Canada’s finance minister responded by holding off on a second round of retaliatory tariffs against U.S. products. However, Canada’s first set of counter-tariffs—worth about $21 billion—is already active, according to BBC.
Financial markets have reacted negatively to the ongoing uncertainty. BBC reported that on Thursday, the S&P 500, which tracks the performance of 500 of America’s largest companies, fell by nearly 1.8%. Investors are worried about the economic impact of these trade tensions.
Despite concerns, Trump denied that his decision to adjust the tariffs was influenced by the stock market. BBC quoted him as saying, “Nothing to do with the market. I’m not even looking at the market because, long-term, the United States will be very strong with what’s happening.”
The exemptions apply to goods traded under the U.S.-Mexico-Canada Agreement (USMCA), the updated version of North America’s free trade deal that Trump signed during his first term. However, a BBC source at the White House revealed that nearly 50% of imports from Mexico and 62% from Canada could still be affected by tariffs.
Trump said that he agreed to these exemptions after a call with Sheinbaum, noting that the changes would help automakers and suppliers. He also reduced tariffs on potash, a key fertilizer ingredient for U.S. farmers, from 25% to 10%, BBC reported.
BBC also highlighted that Sheinbaum and Trump discussed other important issues, including the flow of fentanyl, a dangerous drug, from Mexico into the U.S., as well as stopping the illegal trade of guns going the other way. Trump also spoke with Canadian Prime Minister Justin Trudeau, and BBC reported that their conversation was described as “heated but substantive.”
Canadian officials, however, are not entirely satisfied. BBC quoted Ontario Premier Doug Ford as saying, “A pause on some tariffs means nothing.”
Before Trump’s announcement, Ford had threatened a 25% tariff on electricity supplied to New York, Michigan, and Minnesota, starting Monday.
Trump’s Treasury Secretary Scott Bessent took a more aggressive stance, warning Canada against retaliatory measures.
According to BBC, Bessent said, “If you want to be a numbskull like Justin Trudeau and say, ‘Oh, we’re going to do this,’ then tariffs are probably going to go up.”
Experts worry that these trade fights could harm the economy. BBC explained that billions of dollars worth of goods move daily between the U.S., Canada, and Mexico, and decades of free trade have tightly linked their economies.
While Trump argues that tariffs will protect American businesses, many economists—cited by BBC—warn that tariffs will make goods more expensive for American consumers and could trigger economic downturns in Mexico and Canada.
BBC also pointed out that the U.S. economy is already feeling the pressure. In January, imports surged due to fear of tariffs, leading to a 34% jump in America’s trade deficit, now totaling over $130 billion.
Some business leaders see Trump’s flexibility as a good sign. BBC interviewed Gregory Brown, CEO of BenLee, a company that makes large trailers.
He admitted that he had adjusted his prices multiple times in five weeks due to Trump’s policies but noted that customers were still willing to pay the higher costs.
He described the current economic climate as a “great growth economy” and suggested Trump was simply adapting to “business reality.”
However, some financial experts told BBC that Trump’s back-and-forth decisions could still trigger an economic crisis.
One investment manager warned, “I think we’re going to have a recession before whatever succeeds in the future. You’re going to get the bad before you get the good.”
As trade tensions continue, BBC reports that Trump is set to announce more trade rules on April 2, which could introduce new tariffs on other countries.
While some businesses welcome his adjustments, others fear that uncertainty could lead to serious economic consequences.
Credit: BBC
https://www.bbc.com/news/articles/c5y03qleevvo