The U.S. has granted a temporary exemption to Mexican goods from the newly imposed 25% tariffs under the USMCA trade agreement. President Donald Trump made the announcement on Thursday after a call with Mexico’s President Claudia Sheinbaum. The exemption will last until April 2.
Trump posted on Truth Social, stating, “After speaking with President Claudia Sheinbaum of Mexico, I have agreed that Mexico will not be required to pay tariffs on anything that falls under the USMCA Agreement.”
Mexico’s President Sheinbaum confirmed the discussion, emphasizing mutual efforts to curb the flow of fentanyl into the U.S., a key issue in tariff negotiations.
No Relief for Canada Yet
Despite earlier remarks from U.S. Commerce Secretary Howard Lutnick suggesting a broader exemption for USMCA-compliant goods, Trump did not mention Canada in his announcement.
Lutnick had indicated that all goods complying with the USMCA might receive an exemption, saying, “If you lived under Donald Trump’s US-Mexico-Canada Agreement, you will get a reprieve from these tariffs.” However, Canada is still awaiting an official decision.
Canadian Prime Minister Justin Trudeau responded, calling Lutnick’s comments “promising” but stated that “tariffs remain in place, and therefore our response will remain in place.”
Markets React to Trade Uncertainty
The ongoing tariff decisions have impacted financial markets. The S&P 500 dropped 1.8%, marking a 6.5% decline from its mid-February high. Investors fear the tariffs could fuel inflation and slow economic growth.
The Mexican peso showed slight gains, while the Canadian dollar weakened following the uncertainty. Bill Sterling, a global strategist at GW&K Investment Management, noted, “The unpredictability of tariffs is making business leaders hesitant to make investment decisions.”
What’s Next? Reciprocal Tariffs Loom
The tariff exemption for Mexico is temporary, with a hard deadline of April 2. Trump has hinted at a broader reciprocal tariff strategy, where the U.S. would match the duties imposed by its trading partners.
Lutnick emphasized that the administration’s primary goal remains addressing fentanyl trafficking. However, “if progress is not made, these tariffs could stay beyond April 2,” he warned.
Meanwhile, Trudeau acknowledged the likelihood of a prolonged trade war, stating, “We will continue to be in a trade war launched by the United States for the foreseeable future.”
With Canada still awaiting clarity and Mexico facing a short-term reprieve, North American trade relations remain highly uncertain.