Meanwhile, China will still face an additional 10% tariff on exports to the US from February 4.
This is the third time in two weeks that Mr. Trump has suspended plans to impose tariffs on two close trading partners of the United States. The decision was made after discussions on February 3 with Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum.
Step back from the brink of trade confrontation
The last-minute deal was announced as global financial markets reeled from the prospect of escalating trade tensions between the world's top economies.
Earlier this weekend, Mr. Trump shook up US-Mexico relations by announcing a 25% tariff and accusing the administration of President Claudia Sheinbaum of having an “unacceptable alliance” with Mexican criminal gangs. Mexico immediately denied the accusations, calling them “slanderous,” but later chose to de-escalate after reaching a series of agreements with Washington.
Sheinbaum said Mexico would deploy 10,000 members of its national guard to stop drug trafficking, especially fentanyl, into the U.S. In return, the U.S. pledged to clamp down on the flow of high-powered weapons into Mexico.
Mr Trump later confirmed the deal on the social network Truth Social, stressing that Mexico would “mobilise 10,000 troops to stop the flow of fentanyl and illegal immigrants into the United States”.
Canada also reached a last-minute deal.
Canadian Prime Minister Justin Trudeau announced that the US will suspend tariffs for another 30 days, in exchange for Canada implementing a $1.3 billion border security plan.
“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 stop fentanyl,” said Mr. Trudeau.
Market and international response
News of the Mexico deal helped financial markets recover somewhat from a sharp decline earlier in the week. 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.
Meanwhile, the European Union (EU) is also in Trump's sights. 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 asserted that tariffs are a “powerful tool” to strengthen the US economic position.
“I am very pleased with this initial result. The tariffs announced on February 1st will be put on hold for 30 days to see if we can reach a fair trade agreement 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.
