Mexico is exempted from the newly-imposed tariffs of 25% on all goods and services that are covered by USMCA, a temporary relief to a major US trading partner.
Trump said in a post to social media on Thursday, following his conversation with Mexican president Claudia Sheinbaum.
I made this choice as a sign of goodwill, and to show respect for Sheinbaum.
This announcement came after Commerce Secretary Howard Lutnick stated that Trump would consider a temporary exclusion from the newly-imposed tariffs of 25% on all goods and services imported from Canada and Mexico under the United States-Mexico-Canada Agreement.
It is unclear if he intends to extend the USMCA’s full pause on Canada. However, he did say that he was willing to exempt Canadian automobiles and parts imported as part of the deal.
Trudeau calls Trudeau’s “promising promise” regarding the USMCA tariff reprieve
Lutnick has described the exemption in terms of a benefit for companies that operate under USMCA rules. He also warned businesses who stray outside the framework will be subject to all the effects of tariffs.
If you were living under Donald Trump’s US, Mexico, and Canada Agreement, you are now exempt from tariffs. If you choose to leave that agreement, it is at your risk and you will be held accountable today, Lutnick explained.
This exemption will last up until the 2nd of April, when Trump plans to introduce a second round of tariffs.
Included in these measures would be “reciprocal duties” on different countries, as well as sector-specific actions targeting industries like automotive, pharmaceuticals and semiconductors.
In remarks made to Canadian reporters, Justin Trudeau, the Prime Minister of Canada called Lutnick’s comments “promising”.
Trudeau stated that “that aligns with the discussions we’ve had with officials of the administration, but I will wait until there is an official agreement before talking about Canadian responses and looking at its details.”
It is still a positive sign. “But I’ll highlight that this means the tariffs are still in effect, so our response is also in force.”
Markets are on edge due to uncertainty regarding tariffs
As the financial markets were reeling from Trump’s trade measures, news of an exemption was announced.
The stock market opened down on Thursday as it continued a slide that began a week ago, with investors trying to gauge the wider implications of Trump’s trade policy.
After a session-opening plunge of over 600 points, the Dow Jones Industrial Average fell 115 points or 0.3%.
The S&P 500 fell 0.9% while the Nasdaq Composite declined 1.1%.
The stock markets were volatile this week after the tariffs went into effect on Canadian, Mexican and Chinese imports.
Canada and China have responded quickly with retaliatory actions, whereas Mexico plans to announce countermeasures this weekend.
Keith Lerner is the chief market strategist for Truist. This confusion has permeated into day-today market swings.
Investors found relief Wednesday, when the White House announced a deferral for one month of tariffs against automakers who comply with USMCA regulations.
What is USMCA?
USMCA replaced North American Free Trade Agreement in 2020. It was intended to achieve a more equal trade relationship among the US, Canada and Mexico.
This agreement contains measures to strengthen intellectual property rights and support small and medium-sized enterprises, as well as modernize trade rules in the digital economy.
Trump’s tariff policies put the USMCA agreement in jeopardy. Canada and Mexico are pressing for clarification on whether or not compliance with USMCA is enough to protect them from future trade sanctions.
Lutnick said that, beyond economic concerns, the US leverages trade negotiations to gain cooperation from Mexico in regard to fentanyl, a problem Trump has highlighted repeatedly.
He said that both Mexico and Canada had done a lot of research on fentanyl.
Trump’s tariff strategy is linked to his national security concerns. He argues that trade restrictions against China and Mexico can help reduce illicit drug flow and migration in the US.
Trump also signaled his commitment to his larger trade agenda.
He stated in a post on social media that he was determined to lower the US trade surplus, and that he wanted to “change the massive trade deficit” of the US with the rest of the world.
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