The United States has hinted at expanding its reprieve for Canada and Mexico from President Donald Trump’s steep tariffs.
According to Commerce Secretary Howard Lutnick, the one-month pause for car imports may be extended to all goods covered by the North American trade pact.
The tariffs, which kicked in on Tuesday, imposed a 25% levy on US imports from Canada and Mexico, with a lower rate for Canadian energy. The move sent global markets downward and strained ties between the neighboring countries. In response, Ottawa swiftly announced retaliatory levies, while Mexican President Claudia Sheinbaum promised countermeasures.
The tariffs have raised concerns about the impact on trade relations between the US, Canada, and Mexico. Canadian Prime Minister Justin Trudeau warned that Ottawa and Washington would be in a trade war “for the foreseeable future,” saying his country would not back down until US tariffs were fully lifted.
The US trade deficit has surged to a new record in January, with imports spiking and tariff worries flaring. The overall trade gap ballooned 34% to $131.4 billion, with the US economy seeing its goods deficit hit a fresh record of $1.2 trillion for the full year of 2024.
The International Monetary Fund has warned that Trump’s tariffs could have a “significant adverse economic impact” on Canada and Mexico. Analysts also note that the US deficit was likely bolstered by gold imports, with businesses trying to get ahead of additional costs from potential tariffs and supply chain disruptions.
Trump has made a series of tariff threats on allies and adversaries alike, imposing levies on Canada, Mexico, and China over illegal immigration and fentanyl concerns. Canada contributes less than 1% of fentanyl to the United States’ illicit supply, according to Canadian and US government data. However, Trump has shrugged off these figures.
The US tariff relief for Canada and Mexico is a welcome development, but the ongoing trade tensions and widening trade gap remain concerns. The impact of Trump’s trade policy on the US economy and its trade relations with neighboring countries will be closely watched in the coming months.