US President Donald Trump announced a 30-day suspension of the threatened 25 per cent tariffs on Mexico and Canada, following agreements to enhance border and crime enforcement. This move comes as a relief to the economies of all three nations, which were bracing for the economic fallout of a potential trade war.
The tariffs, originally set to take effect on Tuesday, have been paused as both Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum committed to bolstering border security and addressing drug smuggling concerns. Trump expressed satisfaction with the outcome, stating, "As President, it is my responsibility to ensure the safety of ALL Americans, and I am doing just that. I am very pleased with this initial outcome, and the Tariffs announced on Saturday will be paused for a 30 day period to see whether or not a final Economic deal with Canada can be structured, FAIRNESS FOR ALL!"
In response to the US demands, Canada has agreed to deploy new technology and personnel along its border with the country. Additionally, cooperative efforts will be launched to tackle organised crime, fentanyl smuggling, and money laundering. Meanwhile, Mexico will reinforce its northern border with 10,000 National Guard members to curb illegal migration and drug trafficking.
The US has also pledged to prevent the trafficking of high-powered weapons to Mexico. This agreement temporarily averts a trade war, which analysts feared would lead to increased consumer prices and economic strain across North America.
WHAT ABOUT CHINA TARIFFS?
While the tariff threat on Mexico and Canada has been paused, the US tariffs on China are still set to take effect imminently, with a 10 per cent duty scheduled to begin. Trump has warned of further increases unless China takes action to stop the flow of fentanyl into the US, stating, "China hopefully is going to stop sending us fentanyl, and if they're not, the tariffs are going to go substantially higher."
Looking ahead, Trump indicated that the European Union could be the next target for tariffs, although no specific timeline was provided. EU leaders have expressed readiness to negotiate but have also prepared to retaliate if necessary. Trump hinted that the UK, having left the EU in 2020, might be spared from potential tariffs.
The current tariff strategy aims to tackle issues such as immigration and narcotics trafficking while encouraging domestic industry growth, despite acknowledging potential short-term impacts on US consumers.
OIL FALLS
The announcement of the tariff pause led to a decline in oil prices, with Brent futures falling by 0.5 per cent and US West Texas Intermediate decreasing by 1 per cent. Despite the temporary relief from tariffs, analysts warn that Canada remains susceptible to trade disputes unless it diversifies its export options. "It would take several years to build this infrastructure, but it would provide Canadian producers more flexibility and the potential for more destinations for Canadian oil," noted ING analysts.
(With Reuters inputs)