Trump Hints at Tariff U-Turn on Canada, Mexico

2025-03-05 general

Washington, Wednesday, 5 March 2025.
Barely 48 hours after imposing tariffs on Canada and Mexico, the Trump administration signals a possible compromise. Commerce Secretary Lutnick indicated a potential rollback, stating the President is considering relief. The news comes amid market unease. The stock market saw sharp declines due to fears of a trade war. Lutnick mentioned a likely announcement today. This suggests a rapid shift in trade policy and its impact on international relations.

Market impact and investor sentiment

The potential compromise follows market declines fueled by trade war anxieties [1]. On March 3, 2025, the U.S. stock market experienced its second consecutive day of sharp declines due to these fears [1]. The Dow Jones Industrial Average fell by 650 points, a 1.505 1.48% decrease, closing at 43,191 [3]. The S&P 500 also dropped by 1.76%, and the Nasdaq Composite saw a steeper decline of 2.64% [3]. This market volatility underscores investor sensitivity to trade policy changes and the potential economic repercussions of escalating tariffs [6].

Retaliatory measures and trade tensions

The U.S. initially imposed 25% tariffs on imports from Canada and Mexico [1]. This action prompted immediate responses from affected nations [5]. Canadian Prime Minister Justin Trudeau announced that Canada would impose 25% tariffs on $30 billion worth of U.S. goods in retaliation [3][5]. Mexican President Claudia Sheinbaum also criticized the tariffs, stating that “nobody wins” with this decision [5]. Sheinbaum planned to unveil retaliatory tariffs against the U.S. this weekend [5] [alert! ‘weekend date not precise’]. These reciprocal actions highlight the escalating trade tensions and the potential for a full-blown trade war.

USMCA and future trade relations

Secretary Lutnick suggested that any tariff relief would be contingent on adherence to the United States-Mexico-Canada Agreement (USMCA) rules [2]. The USMCA, which replaced NAFTA, aims to govern commerce between the United States, Mexico, and Canada [7]. Trump’s initial tariffs of 25% on Canadian and Mexican goods seemingly violate USMCA’s zero-tariff commitment [7]. Lutnick indicated potential tariff changes on April 2 [2]. He also conveyed that President Trump aims to find a middle ground with Canada and Mexico [1].

Expert opinions and economic outlook

Experts suggest caution regarding the market’s trajectory for the remainder of the year [3]. Gina Bolvin, president of Bolvin Wealth Management Group, anticipates that realizing gains in 2025 may take the entire year, and even then, they might be modest [3]. Gustavo Flores-Macias, a professor at Cornell University, noted that the stock market has erased gains from the “Trump bump” due to tariff uncertainty [3]. He added that the expected upward pressure on prices is giving investors pause [3]. These expert opinions reflect the broader concern that trade uncertainties may continue to weigh on market performance.

Bronnen

USMCA Trade Tariffs