Donald Trump pulls back from brink with Mexico and Canada as China braces for trade war

U.S. President Donald Trump agreed to suspend the imposition of full tariffs on Mexico and Canada for one month, allowing both countries to reach agreements on trade and security issues. This temporary measure was made just hours before the midnight deadline for imposing hefty tariffs on goods from Mexico, Canada, and China.

Following lengthy phone calls between the leaders of the countries, Mr. Trump confirmed that he had agreed to suspend the tariffs after Mexican President Claudia Sheinbaum pledged to send 10,000 National Guard troops to the U.S.-Mexico border. "These troops will be specifically tasked with stopping the flow of fentanyl and illegal immigrants into our country," Mr. Trump stated on "Truth Social."

The two countries will use this one-month suspension period to engage in further negotiations, with the U.S. side being led by Secretary of State Marco Rubio, who will meet with Mexican officials. "I look forward to engaging in these talks with President Sheinbaum in an effort to reach a 'deal' between our two countries," Mr. Trump wrote on "Truth Social." Ms. Sheinbaum indicated that the U.S. has agreed to take further measures to prevent the smuggling of high-powered weapons into Mexico.

Subsequently, Canadian Prime Minister Justin Trudeau stated that tariffs on his country would be delayed for at least 30 days after pledging to increase border security cooperation. Mr. Trudeau promised to deploy nearly 10,000 frontline personnel to ensure "24/7" monitoring of the U.S.-Canada border. He also announced plans to appoint a "Fentanyl Czar" and establish a joint Canada-U.S. task force to combat organized crime, fentanyl, and money laundering. Mr. Trump had justified imposing high tariffs on the northern neighbor by citing the flow of fentanyl into the U.S. through the Canadian border. Earlier this month, he described the amount of fentanyl entering the U.S. from Canada as "massive."

However, data from U.S. Customs and Border Protection shows that in fiscal year 2024, approximately 0.2% of the total fentanyl seized by authorities came from Canada, while 96.6% came from Mexico. Following the agreement with Canada, Mr. Trump said, "It is my responsibility to keep all Americans safe, and I am doing that. I am very pleased with this initial result." Despite the one-month delay, some believe that the damage between the two countries has already been done. "The whole thing is unusual and abnormal and very insulting to Canada," said James Blanchard, who served as the U.S. ambassador to Canada under former Democratic President Bill Clinton. "Mr. Trump has insulted them, mocked them, issued threats, called them the 51st state, and attacked Prime Minister Trudeau." "How do we get the genie back in the bottle? That will be a real challenge."

Over the weekend, Mr. Trump signed a series of executive orders announcing that tariffs of 25% would be imposed on all imports from Mexico and Canada, and 10% on all imports from China, starting on Tuesday local time. Energy products, such as oil, from Canada would be taxed at a lower rate of 10%. These orders targeting the U.S.'s major trading partners have sparked a trade war that could undermine economic growth and increase prices for U.S. consumers on a range of goods, from avocados and tequila to livestock and electronics. The U.S.’s protectionist measures mark a sharp shift in its trade policy, with some allies raising the possibility of long-term ruptures in U.S. relations with its neighbors. Mr. Trump has long accused Mexico, Canada, and China of bringing drugs and illegal immigrants into the U.S.

During his campaign, he pledged to use tariffs against other countries and vowed to crack down on illegal immigration and crime. The U.S. and Mexico are each other's largest trading partners, while trade between the U.S. and Canada is close to $1 trillion annually. Over the weekend, Mr. Trump admitted that the measures could cause "a little pain" for Americans, as the increased taxes on tariffed goods typically lead to costs being passed on to importing businesses and consumers. While the agreement has eased pressure on Mexico and Canada, the prospect of China receiving a similar reprieve appears slim, as the tariffs on China are still scheduled to take effect at midnight on Tuesday local time. Mr. Trump stated that he plans to speak with Chinese leaders in the next 24 hours and warned that if he cannot reach an agreement with them, the tariffs will be very high. "We have meetings scheduled, we'll see what happens. But this is just the beginning," Mr. Trump said. "If we can't make a deal with China, then the tariffs will be very, very high."

China has indicated that it will challenge the Trump administration’s tariffs with the World Trade Organization and take unspecified retaliatory measures. Meanwhile, European countries have stated that the EU is prepared to retaliate against the U.S. if Mr. Trump follows through on his threat to impose tariffs on European goods. Previously, Mr. Trump had warned that tariffs on the EU were "certainly going to happen." "Europe has been abusing the United States for years, they can't do that, and they want to make a deal," Mr. Trump said. "I'm telling you, in every case, they want to make a deal. They've been abusers, and they want to make a deal. So we'll see." Ahead of a meeting in Brussels, EU leaders called for calm, highlighting the value of cooperation, but also stated that they would not hesitate to respond with tariffs if the EU is attacked. Polish Prime Minister Donald Tusk said at the meeting that the EU should do everything possible to avoid a "completely unnecessary and stupid tariff war" with long-standing allies.

Financial markets have also been unsettled by the prospect of a sharp slowdown in the global economy and a resurgence of inflation as a result of Mr. Trump’s impending tariffs.