For the third time in two weeks, President Donald Trump has halted plans to impose tariffs on two of America’s closest trading partners. His decision, after separate calls with Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau, has averted — at least for now — an economic shock that would have tipped both of America’s neighbors into recession while slowing growth and raising inflation in the United States.
The decision to delay the tariffs came after Mexican President Claudia Sheinbaum pledged to deploy 10,000 National Guard troops to the border to stem the flow of fentanyl and other drugs into the U.S. In return, the U.S. pledged to clamp down on the flow of high-powered weapons into Mexico.
For his part, Canadian Prime Minister Justin Trudeau said that Canada will implement a $1.3 billion border security plan. Accordingly, nearly 10,000 frontline personnel will be deployed to protect the border, along with helicopters, modern technology and closer cooperation with the United States to prevent fentanyl.
According to the Washington Post, as of 6 p.m. on February 3, US time (6 a.m. on February 4, Vietnam time), the White House said there was no change in the plan to increase tariffs on Chinese goods by 10%. Mr. Trump declared that the tariff increase on China was just the "beginning" and could increase further if China did not stop the flow of fentanyl to the US. The White House spokesman later said that President Trump might have a phone call with Chinese President Xi Jinping this week.
China announced its retaliatory measures as soon as the 10% tariffs imposed by the US on Chinese goods took effect on February 4. The Chinese government said it would impose an additional 15% tariff on US coal and liquefied natural gas, as well as a 10% tariff on US crude oil, agricultural machinery, large-engine cars and pickup trucks. These measures took effect on February 10. In addition to the retaliatory tariffs, Beijing also announced it would investigate Google for alleged violations of antitrust laws as well as export controls on items related to tungsten and other rare earth elements.
News of the tax deferral helped financial markets recover somewhat from a sharp decline. The S&P 500 fell nearly 2% in morning trading on February 3 before recovering slightly. European and Asian stocks were also under pressure, with Britain’s FTSE 100 down 1.4% before recovering somewhat.
Speaking in Brussels, French President Emmanuel Macron warned that if the US imposes tariffs on Europe, the EU will respond strongly. German Chancellor Olaf Scholz also stressed that the EU is ready to impose retaliatory tariffs but still prioritizes finding a peaceful trade solution.
Despite warnings from economists about the risk of rising prices and negative impacts on the US economy, Mr. Trump still asserts that tariffs are a powerful tool to strengthen the US economic position.
“I am very pleased with this initial result. The tariffs will be suspended for 30 days to see if we can make a fair trade deal with Canada,” Trump wrote on Truth Social.
With this delay, the trade conflict between the US and major partners has not yet ended, while investors continue to wait for further developments from the White House.
