US President Donald Trump has signed orders significantly expanding the goods exempted from his new tariffs on Canada and Mexico.
It marks the second climbdown in two days from Trump on his taxes on imports from America’s two biggest trade partners, measures that have raised uncertainty for businesses and worried financial markets.
On Wednesday he said he would temporarily spare carmakers from 25% import taxes just a day after they came into effect.
Mexican President Claudia Sheinbaum thanked Trump for the move, which the White House said applied to goods shipped under North America’s free trade agreement until 2 April.
The exemptions would currently apply to about 50% of US imports from Mexico and 38% from Canada, according to a White House official. It was not clear which Canadian goods were exempt.
Commerce Secretary Howard Lutnick told CNBC earlier on Thursday that the temporary exemption of tariffs for car part imports from Canada and Mexico could be extended to all products that are part of the United States-Mexico-Canada Agreement (USMCA).
The USMCA was established during Trump’s first term of office. Its 34 chapters covered cars, dairy and lumber amongst other things such as financial services, and the agreement included a review every six years.
On Thursday, Trump wrote on Truth Social that Mexico would be exempt until 2 April.
“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,” he said.
Sheinbaum said she had an “excellent and respectful” call with Trump, adding that the two countries would work together to stem the flow of the opioid fentanyl from Mexico into the US and curb the trafficking of guns going the other way.
An exemption for Canada is expected to be announced later, despite Trump attacking Canadian Prime Minister Justin Trudeau on social media earlier on Thursday by saying he’s done a “terrible job” for Canada.
Trudeau said that discussions with officials within the Trump administration are ongoing, with the goal to get “all tariffs removed”.
But Ontario Premier Doug Ford told CNN that the province would go ahead with a 25% tariff on the electricity it provides to 1.5 million homes and businesses in New York, Michigan and Minnesota from Monday.
The USMCA came into force in 2020 after years of negotiations and revisions. It was a revamp of the North American Free Trade Agreement, which was created in 1994.
Goods worth billions cross the borders of the US, Canada and Mexico each day and their economies are deeply integrated.
The introduction of tariffs has sparked a trade war between the US, its neighbours and also China.
Trump has argued introducing tariffs will protect American industry and boost manufacturing. However, many economists warn tariffs could lead to prices rising for consumers in the US.
Tariffs are paid by the business importing a product or part. Many US businesses have raised concerns about tariffs from America’s two closest trade partners, given the integrated supply chains.
In response to Trump’s initial 25% tariffs, Canada and Mexico also announced retaliatory import levies.
Earlier on Thursday, the Commerce Department revealed US imports spiked in January on the back of tariff fears.
It said America’s trade deficit had increased 34% to more than $130bn (£100bn), with imports for the month rising 10%.
