- Trump expands tariff exemptions for Canada and Mexico amid trade tensions.
- Trudeau warns of a prolonged trade war despite targeted relief.
- US markets drop as uncertainty over tariffs unsettles investors.
US President Donald Trump has signed orders significantly expanding the list of goods exempted from his newly imposed tariffs on Canada and Mexico. The move marks the second time in as many days that Trump has scaled back import taxes on the US’s two largest trade partners, a decision that has fuelled uncertainty among businesses and unsettled financial markets.
On Wednesday, Trump announced a temporary exemption for carmakers from the 25% import levies—just a day after they took effect. The decision was welcomed by Mexican President Claudia Sheinbaum, while Canada’s finance minister responded by pausing a planned second round of retaliatory tariffs on US goods.
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Canadian Prime Minister Justin Trudeau revealed on Thursday that he had a “colourful” conversation with Trump regarding the tariffs. Reports from US and Canadian media suggest that the US president used profane language multiple times during their heated exchange. Despite the exemptions, Trudeau warned that a full-fledged trade war between the two allies remained likely in the near future.
“Our goal remains to get these tariffs—all tariffs—removed,” Trudeau told reporters. Canada has already enacted a first round of retaliatory measures targeting C$30 billion ($21 billion, £16 billion) worth of US goods. The escalating trade tensions have rattled financial markets, raising fears of economic turbulence.
On Thursday afternoon, US stock indexes reflected investor concerns, with the S&P 500—tracking 500 of the largest American companies—closing nearly 1.8% lower. Trump, however, dismissed speculation that the tariff exemptions were linked to market performance.
“Nothing to do with the market,” Trump said. “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 imported under the US-Mexico-Canada Agreement (USMCA), a trade pact Trump signed during his first term. Under the agreement, items such as televisions, air conditioners, avocados, and beef currently enter the US tariff-free, according to analysis by Trade Partnership Worldwide. However, a White House official estimated that roughly 50% of US imports from Mexico and 62% from Canada may still face tariffs—though those figures could shift as businesses adjust their supply chains in response to the new regulations.
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Meanwhile, the administration continues to push ahead with its broader trade agenda. The White House has promised to announce new, “reciprocal” tariffs on other nations by April 2. Trump said he granted the temporary exemptions for Canada and Mexico after a phone call with Sheinbaum, explaining that the move aimed to assist carmakers and parts suppliers. The revised measures also reduced tariffs on potash—a key fertiliser ingredient vital to US farmers—from 25% to 10%.
Following their call, Sheinbaum described her conversation with Trump as “excellent and respectful,” adding that the two leaders also agreed to collaborate on curbing the flow of fentanyl from Mexico into the US and stemming the trafficking of firearms from the US into Mexico.
