Trump Says He Will Delay Mexico Tariffs on Goods Under USMCA
President Donald Trump said he will exempt Mexico from his new 25% tariffs on any goods and services that fall under the North American trade agreement known as USMCA, offering a reprieve for a major US trading partner.
“This Agreement is until April 2nd,” Trump said in a social media post Thursday after speaking with Mexican President Claudia Sheinbaum. “I did this as an accommodation, and out of respect for, President Sheinbaum.” (…)
It’s not clear that Trump will extend the full USMCA pause to Canada, though he has already said he would exempt Canadian autos and auto parts that are imported under the trade deal. Whatever exemption is implemented is expected to last until April 2, when Trump expects to enact a fresh round of tariffs, including “reciprocal” duties on countries around the world and sector-specific ones, like on auto, pharmaceutical and semiconductor imports. (…)
“We were treated with a great deal of respect,” Sheinbaum said. (…)
The WSJ:
President Trump’s decision to lift tariffs on goods from Mexico that comply with the North American free trade pact will significantly reduce the volume of trade covered by the duties he imposed on Tuesday this week.
In 2024, about 50% percent of Mexican exports to the U.S. complied with the agreement, including products like automobiles and agricultural goods that are staples for U.S. consumers, according to the analytics firm Trade Partnership Worldwide.
Big Chunk of North American Trade Remains Exposed to Tariffs
(…) But there is a catch: The deal only applies to goods that had been traded duty-free under a 2020 North American trade agreement.
That is less straightforward than it might seem, as the U.S.-Mexico-Canada trade agreement sets forth an intricate and complex set of rules governing trade among the three countries. Thursday’s turnabout has trade experts and lawyers rushing to determine exactly what goods will be subject to higher tariffs, let alone businesses that have skin in the game.
Generally speaking, under the USMCA, which took effect during Trump’s first term, products enter the U.S. duty-free if businesses can show they comply with certain rules regarding the origins of those products’ components.
For example, a passenger vehicle only complies with USMCA if the majority of the components—including steel and aluminum—originate in North America. In addition, 40%-45% of the vehicle’s value must come from factories where workers earn at least $16 an hour.
Because USMCA rules are so complicated, businesses have sometimes chosen to pay a tariff on a given product instead of expending time and money to figure out whether it is USMCA-compliant, according to trade experts.
The analytics firm Trade Partnership Worldwide estimated that in 2024, 50% of Mexican exports and 38% of Canadian exports entered the U.S. duty-free under USMCA. These products include cars, trucks and auto parts from either country. Also falling under this category are Canadian rapeseed oils, chocolates, beef and engines; and Mexican television sets, air conditioners, avocados and tomatoes.
About 40% of U.S. imports from Canada and Mexico fell outside USMCA but still passed through duty-free: The U.S. imposes no tariffs on a host of products, regardless of the supplier country.
From Mexico, such products included computers, medical equipment, phones and beer. From Canada, such products included petroleum gases, aluminum, airplanes and turbojet engines.
Only about 10% of total Mexican exports to the U.S. in 2024 faced any tariffs at all. This included about $11 billion in auto parts and $7 billion in passenger vehicles that likely couldn’t meet USMCA rules of origin. It also included about $9 billion in low-tariff oil products in which suppliers opted to pay the duty rather than deal with the paperwork and compliance costs required to make a claim under USMCA.
In 2024, only about 22% of Canadian exports to the U.S. faced any tariffs. This included nearly all oil with low tariff rates, rather than products that couldn’t comply with USMCA rules.
The 25% tariff that Trump implemented on Tuesday is likely high enough to prompt many businesses to do the legwork to figure out whether their products fit under USMCA, said Ed Gresser, a former trade negotiator and vice president of the Progressive Policy Institute.
TPW estimates that each day the U.S. imports $1 billion of goods from Canada and Mexico that faced no tariffs even without USMCA. That means companies could now be on the hook for $250 million a day in new tariffs.
The White House said Thursday a lower 10% tariff would apply to Canadian energy products and potash from either country that falls outside USMCA.
That means that the majority of $124 billion of Canadian energy exports to the U.S. last year could be subject to higher tariffs under the new regime. Businesses didn’t bother to claim USMCA for $78 billion in Canadian crude oil that came into the U.S. last year because the products faced only 0.1% tariffs. Companies could now begin to make claims with more money at stake, although if they don’t because of resource and time considerations, the products would be subject to a 10% tariff.
About $16 billion of other primarily Canadian energy products came in tariff-free and outside of USMCA; that would now be subject to 10% tariffs.
About $3 billion of Canadian potash entered tariff-free and outside of USMCA, according to TPW, and similarly would now be subject to 10% tariffs.
Gresser said that even U.S. Customs and Border Protection officials will be struggling with implementation, which involves understanding the changes and reconfiguring electronic databases appropriately.
“A mountain of legal challenges and headaches are ahead,” he said.
Gary Hufbauer, an economist at the Peterson Institute for International Economics, said that given the complexities of rules and constant changes by Trump, businesses will continue to put orders on hold and delay investment decisions.
“This is tremendously disruptive,” he said. “There’s no rhyme or reason to it.”
Trump’s Tariffs Are No ‘Emergency’ The President invokes a law that doesn’t give him power to impose sweeping tariffs. Someone should sue.
The WSJ Editorial Board:
President Trump delayed his Mexico-Canada tariffs again on Thursday—this time for another month. He’s treating the North American economy as a personal plaything, as markets gyrate with each presidential whim. It’s doubtful Mr. Trump even has the power to impose these tariffs, and we hope his afflatus gets a legal challenge.
The Constitution gives power over trade to Congress, which for most of U.S. history wrote tariff law. That changed after the catastrophe of the 1930 Smoot-Hawley tariff, as Congress said stop us before we kill the economy again and ceded authority to the President to negotiate bilateral trade deals. It ceded more power after World War II.
The President now has the explicit power to restrict imports, but only for specific reasons. The President may impose tariffs on imports that threaten national security (Section 232) or in response to “large and serious” balance-of-payments deficits (Sec. 122), a surge of imports that harms U.S. industry (Sec. 201), and discriminatory trade practices (Sec. 301).
During his first term, Mr. Trump used Section 232 to impose tariffs on steel and aluminum and 301 on goods from China. Mr. Trump’s executive orders imposing 25% across-the-board tariffs on Canada and Mexico and 10% (now 20%) on China instead invoke the 1977 International Emergency Economic Powers Act (IEEPA), which gives the President authority to address an “unusual and extraordinary threat” if he declares a national emergency. Mr. Trump deems fentanyl and other drugs such an emergency.
IEEPA’s language is intentionally broad to give the President latitude to address wide-ranging threats. But Mr. Trump’s tariffs arguably constitute a “‘fundamental revision of the statute, changing it from [one sort of] scheme of . . . regulation’ into an entirely different kind,” to quote the Supreme Court’s West Virginia v. EPA precedent distilling its major questions doctrine.
Under that ruling, Congress must expressly authorize economically and politically significant executive actions, which Mr. Trump’s tariffs undeniably are. Whether fentanyl is an unusual and extraordinary threat is debatable, however, since drugs have been pouring across the borders for decades.
The bigger problem is that IEEPA doesn’t clearly authorize tariffs. The law lets the President investigate, block, prohibit or regulate any “importation or exportation” or financial transaction involving “property in which any foreign country or a national” has an interest or “any property, subject to the jurisdiction of the United States.”
Presidents have used the law to freeze assets of foreign governments and nationals, restrict U.S. companies from doing business with them, limit export of technologies and ban imports from adversaries. In March 2022 President Biden used the law to ban imports of Russian energy, seafood and alcoholic beverages—but notably not to impose tariffs.
In April 2022, Congress gave the President authority to raise tariffs on Russia, and Mr. Biden later did. This suggests that neither Congress nor Mr. Biden believed IEEPA provided tariff authority. No President has used IEEPA to impose tariffs. The High Court has said that a “lack of historical precedent” is a “telling indication” that a broad exercise of power is illegal.
It’s true Richard Nixon used a precursor to IEEPA to impose an across-the-board 10% tariff in 1971 to address a growing trade deficit. A lower court ruled the tariff exceeded his authority by letting him “determine and fix rates of duty at will” without Congressional permission. An appeals court upheld the tariff because it “bore an eminently reasonable relationship to the emergency confronted.”
Mr. Trump’s tariff doesn’t appear reasonably related to the fentanyl emergency. And Congress seemed to dislike Nixon’s use of emergency powers to deal with trade issues since three years later it gave the President limited authority to impose tariffs. Mr. Trump may have shunned those authorities because he wants carte blanche to impose tariffs.
Mr. Trump’s tariffs recall Mr. Biden’s use of emergency power for his Covid vaccine mandate, eviction moratorium and student loan forgiveness. The Court blocked all three under its major questions doctrine, which Justice Neil Gorsuch called “a vital check on expansive and aggressive assertions of executive authority.”
Presidents of both parties are now declaring everything to be an emergency to achieve their policy goals without having to deal with a frustrating Congress. If Mr. Trump succeeds in unilaterally imposing tariffs as he sees fit, a future Democratic President will use “emergency” power for climate change and much more. Mr. Trump’s order needs a legal challenge.
Trump and the Art of the Poker Deal Supporters imagine he’s playing chess when he’s skillfully playing cards.
Matthew Hennessy is the WSJ’s deputy editorial features editor:
Donald Trump’s admirers flatter him by saying he plays three-dimensional chess while his opponents play checkers. That’s silly. Mr. Trump’s game is poker, and he’s good at it. (…)
MAGA-world is irrationally wedded to the chess meme. (…) I’d be surprised if Mr. Trump even knows how the pieces move. It’s complicated and takes sustained concentration. To succeed at chess you have to control your passions and act deliberately. When you’ve been bested, you resign gracefully and shake your opponent’s hand.
That’s never been Mr. Trump’s style. He’s temperamentally much more suited to poker, where trash talk and nicknames are part of the fun. You bully and bluff as you try to bankrupt other players and drive them from the game. Poker success requires an appetite for risk and an intuitive sense of probability. But you can also buy the pot with a garbage hand. Sound like anyone we know? (…)
Poker rewards a certain personality type—the improviser, the opportunist. While it pays to have a cool head, you can’t win without an eye for the kill. Mr. Trump doesn’t always know when to shut up, but he never misses a chance to put the knife in.
Politics and the English language would both be poorer without their poker idioms: stack the deck, go all in, keep an ace up your sleeve, play the hand you’re dealt. Mr. Trump’s poker face is as good as they come. He’s got alligator blood. When the chips are down he doesn’t give away much, doesn’t smile or laugh very often. His body language is consistent. All good and necessary qualities for a card sharp. Equally useful for a politician.
An obvious criticism is that Mr. Trump plays too loose. He’s cocky. Runs his mouth. He’s also got more games going at the same time than is advisable, especially given his other obligations. I can’t be the only one who wonders how he keeps all the meetings, phone calls, press conferences, petty feuds, tariff threats, Truth Social posts and Fox News personalities straight in his head.
Maybe this is simply an unavoidable complication of hosting a round-the-clock poker tournament at 1600 Pennsylvania Ave. I hear it’s a hard game to get into, but if you sit down and want to play, you better have the cards.
But it’s one thing to play poker with your own chips. It’s something else to play a high stakes game with somebody else’s money with a definite bearing on his future.
Trump is playing with Americans’ money and future. His only personal stake is his reputation.
The spectators are increasingly realizing that it’s their own skins in the pot and that their apparent master only understands the bluffing part.
There is no strategy, no game plan, no counseling team other than mere loud cheerleaders. He clearly does not count the cards which seem to flow too quickly in front of him.
Bluffing only works for a while if you don’t really make occasional real wins, however lucky they may be.
Improvising can also work for a while, until the table understands there is nothing else.
Your huge pile of chips can be truly attractive and intimidating, but at some point, an erratic player simply bluffing with somebody else’s chips becomes just too scary and people look for another more inviting and rational table.
Today’s FT very well describes the current game and the mood of the real stakeholders finally realizing who they are really banking on:
- The dizzying policy changes have sparked an equity market sell-off, concern from businesses and panic in foreign capitals fearful of a repeat of the chaotic decision-making of Trump’s first term, when he threatened and launched commercial battles with America’s largest trading partners, then backed down.
- “There were three changes in 24 hours affecting us as a North American auto supplier, and that’s a little bit disconcerting,” said Jeff Aznavorian, president of Clips & Clamps Industries, an engineering group based in Plymouth, Michigan. “We can’t guess what or how or who at the moment. It’s like a whipsaw.” (…)
- “[The tariffs] are off, they’re on, they’re off, they’re 25 per cent, they’re 10 per cent . . . this is not a clear policy vision guiding things,” said Bill Reinsch, a former US trade official at the Center for Strategic and International Studies.
- “He does something, and then the market tanks . . . or a whole bunch of people, like the auto executives, come in and tell him in some polite way, ‘this is really stupid’. And then they go back and rethink and change something.” (…)
- “If we see a prolonged market downturn and the president is hearing from all his rich friends about how he’s messing up their portfolios and destroying their businesses, then maybe at that point he will think again,” Alden said.
- “There’s a lot of uncertainty in business that we can’t control, but when people are doing things that are intentionally leading to chaos it makes it really hard to run a company,” said Traci Tapani, co-president of Wyoming Machine, a metal fabrication company in Minnesota. She said her company wanted to invest in automation equipment but “we’re not pulling the trigger on it because of all this back and forth”.
- “Retailers are looking for stability in the supply chain, and the on-again, off-again nature of the announcements has made it very difficult to plan and prepare,” said Jonathan Gold, vice-president of supply chain and customs policy at the National Retail Federation. (…)
- “He’s brought in people that are either more like minded with him or are more intimidated. It’s hard to say which,” said Reinsch.
The S&P 500 is down 6.7% since its February 19 peak. Nasdaq is down 9.5%. The beloved and widely owned NVidia has tanked 28% while Musk’s TSLA has cratered 46% since its December 17 peak, four weeks after DOGE’s official launch.
Tesla shareholders, true rollercoaster fans if there are any, have done several wild rides only to end up where they were in 2021. TSLA’s P/E was cut in half in the meantime but is still 92x forward earnings.
In just the last 2.5 months, the S&P 500 forward P/E, arguably a measure of confidence in the future, went from 23.2 to 21.0, a huge 9.5% downgrade while S&P 500 companies were reporting 17% profit growth.
Donald Trump is building a reputation for himself as the flip-flopper in chief — the president who, after announcing a bold new policy today, is more than likely to reverse it tomorrow. (…)
Across-the-board tariffs on Mexico and Canada — two of America’s three largest trading partners — have been on and then off and then on and then off. Colombia knows the feeling.
- The government put 80 million square feet of its real estate up for sale, only to then take the “for sale” sign down.
- Trump has fired federal employees at the CDC, the FDA, the National Nuclear Security Administration, and the Department of Agriculture, only to then re-hire them.
- He touted the use of military aircraft to carry out high-profile deportations, only to suspend the flights after finding them costly and inefficient.
“This is the art of the deal,” a White House spokesman tells Axios about the tariff reversals, adding that the General Services Administration and individual agencies, rather than Trump himself, are responsible for other executive-branch actions.
Elon Musk is also distancing himself from the firings of federal workers. (…)
Republicans in Congress have repeatedly found themselves boxed in by Trump’s flip-flops.
- He spent weeks equivocating on whether Congress should pass his agenda in one bill or two — then blindsided the Senate by backing House Republicans’ one-bill approach.
- He promised not to cut Medicaid, then backed a House GOP budget plan that could force exactly that in order to meet its proposed spending cuts.
- He has vowed to achieve the unthinkable by balancing the budget — while endorsing trillions of dollars in tax cuts, plus new campaign promises like no tax on tips or overtime.
The stock market, for one, is tiring of such shenanigans. On Wednesday, stocks fell on news that tariffs were being imposed — and then on Thursday, when those tariffs were suspended, stocks fell again.
- Foreign investors like French energy company Engie are on the record as saying that they need clarity and predictability in order to invest in the U.S. — something that’s clearly missing at the moment.
- “I’m not even looking at the market,” Trump told reporters in the Oval Office Thursday, disavowing his longtime favorite metric for economic success. (…)
Probably totally unrelated…
SpaceX Starship rocket explodes after launch
SpaceX’s Starship rocket exploded minutes after it launched from Texas Thursday. (…)
It’s the second consecutive Starship test flight from Elon Musk’s space technology company to end with destruction. Another such launch resulted in an explosion nearly two months ago.
SpaceX caught the first-stage booster back at the pad with giant mechanical arms, but engines on the spacecraft on top started shutting down as it streaked eastward for what was supposed to be a controlled entry over the Indian Ocean.
Contact was lost as the spacecraft went into an out-of-control spin.
… or maybe not: “As always, success comes from what we learn, and today’s flight will offer additional lessons to improve Starship’s reliability,” the post read.
China Scolds ‘Two-Faced’ U.S. in Rebuke of Trump’s Agenda
(…) “No country should harbor the illusion that it can suppress and contain China while simultaneously building good relations with China,” [China’s Foreign Minister] Wang Yi said Friday. “Such two-faced methods are not only detrimental to the stability of bilateral ties but also make it impossible to build mutual trust.” (…)
He offered kind words for Europe, reflecting the opportunity that China senses to strengthen relations with traditional U.S. allies. (…)
“China still has confidence in Europe and believes that Europe can become a trusted partner of China,” Wang said. “The two sides have the ability and wisdom to properly resolve the existing problems through friendly consultations.” (…)
“Where there are blockades there are breakthroughs,” Wang said. “Where there is suppression there is innovation.” (…)
Chinese officials are still working to figure out exactly what Trump wants on trade. While the White House says it is using tariffs to punish China for its role in America’s fentanyl crisis, Chinese officials say they see fentanyl as a pretext for undermining China’s economy. (…)
China “opposes the monopoly of international affairs by a few countries,” he said. “The voice of the Global South should be better listened to.” (…)
Wang also emphasized China’s close ties with Russia, playing down the hopes of some in the Trump administration that the U.S. could divide the two to isolate Beijing. That strategy has come to be known as a “reverse Nixon” or “reverse Kissinger,” a reference to the thaw in U.S.-China relations in the 1970s.
The Sino-Russian relationship “is a constant in a turbulent world, not a variable in the geopolitical games,” he said.