Canada and Mexico have struck deals with the US to pause incoming tariffs. Here's what we know

U.S. President Donald Trump had previously threatened to impose tariffs on imported goods from Canada and Mexico starting February 4th. After speaking with Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum, President Trump agreed to suspend the implementation of these tariffs.

President Trump stated that the tariffs were intended to "protect Americans" from the deadly drug fentanyl and to limit illegal immigration into the United States. However, after speaking with the Canadian and Mexican leaders, he decided to postpone the implementation of these tariffs. This decision aims to allow time for further negotiations and avoid a potential trade war.

According to the agreement, President Sheinbaum stated that Mexico will immediately deploy 10,000 National Guard members to its shared border to combat drug trafficking, particularly fentanyl. She also stated that the agreement includes a U.S. commitment to take action to prevent the trafficking of high-powered weapons into Mexico. President Trump stated that he had a "very friendly conversation" with the Mexican President and looks forward to "engaging in negotiations with Mexico."

Canada has also pledged to take similar measures. Prime Minister Trudeau stated that Canada is implementing its $1.3 billion border plan, including strengthening coordination with U.S. partners and increasing resources to stop the flow of fentanyl. Canada will also establish a new "Fentanyl Commissioner" position and increase efforts to list drug cartels as terrorist entities in response to the opioid crisis. President Trump expressed satisfaction with the initial results and stated that he would suspend the tariffs in order to reach a financial and economic agreement with Canada.

Currently, the tariffs have been suspended for 30 days to allow the countries to continue negotiations. President Trump had asked President Sheinbaum how long she wanted the tariffs suspended, and President Sheinbaum suggested suspending them forever. However, President Trump stated that Mexico has one month to demonstrate results, and President Sheinbaum stated that she believes Mexico will achieve good results within a month. While Canada and Mexico have secured some additional time, President Trump could reinstate the tariffs at any time. He has already planned to announce tariffs on imported goods from the European Union, stating that tariffs with the EU are "certainly going to happen" and could be implemented "soon." These suspensions provide a cooling-off period for a volatile time in North America, which was teetering on the edge of a trade war, preventing economic growth from being threatened.

The 10% tariffs imposed by the United States on China are still scheduled to take effect within hours. But President Trump plans to speak with Chinese President Xi Jinping this week. White House Press Secretary Karoline Leavitt stated that the call will take place in the coming days, which would be the first known conversation between the two leaders since President Trump took office on January 20th. President Trump had previously stated that if an agreement cannot be reached, more import taxes could be imposed on China, and the tariffs would be "very, very substantial." The Chinese Foreign Ministry issued a statement over the weekend stating that China "firmly condemns and opposes this (tariff) move" and will take "necessary countermeasures" at the World Trade Organization.

President Trump initially implemented the tariffs to fulfill a campaign promise to impose import tariffs on some of America's largest and closest trading partners. He believes that tariffs will promote U.S. economic growth, protect jobs, and increase tax revenue. Furthermore, the tariffs are also intended to compel these countries to take more measures to stop the flow of fentanyl into the United States and limit illegal immigration into the United States. The U.S. government states that the chemicals used to make fentanyl come from China, while Mexican cartels illegally supply fentanyl and have fentanyl labs in Canada.

Tariffs are taxes imposed on goods imported from other countries. President Trump initially stated that he would impose a 25% tariff on goods from Canada and Mexico. Therefore, an item worth $4 would have an additional $1 fee. Companies that import goods pay the tariffs to the U.S. government. They often pass the higher costs on to customers in the form of higher prices. Therefore, economists believe that consumers ultimately pay for the tariffs. When President Trump stated that he would impose tariffs on Canada, Mexico, and China, economists worried that this would lead to higher prices for food, electronics, and various other household expenses, potentially putting pressure on the U.S. inflation rate. Economic research has shown that the tariffs implemented by President Trump during his first term had an impact on U.S. consumers. For example, from 2018 to 2023, tariffs on imported washing machines led to a 34% increase in the price of laundry equipment in the United States. When the tariffs expired, prices decreased.

Imposing tariffs is not new to President Trump. During his first presidency, he imposed tariffs ranging from 10% to 50% on $283 billion worth of U.S. imports. In response, several countries, including China, Russia, Canada, Mexico, and the European Union, filed lawsuits against the United States at the World Trade Organization. Many countries also took retaliatory tariff measures. In 2019, President Trump also used tariff threats to persuade Mexico to crack down on cross-border immigration.