US President Donald Trump has suspended the 25 per cent tariffs he imposed this week on most goods from Canada and Mexico, the latest twist in a fluctuating trade policy that has unsettled financial markets and fanned worries over inflation and a growth slowdown.
The exemptions, covering the two largest US trading partners, expire on April 2 when Trump has threatened to impose a global regime of reciprocal tariffs on all US trading partners.
Trump had imposed a 25 per cent levy on imports from both on Tuesday and had mentioned an exemption only for Mexico earlier on Thursday, but the amendment he signed on Thursday afternoon covered Canada as well.
The three countries are partners in a North American trade pact.
For Canada, the amended order also excludes duties on potash, a critical fertiliser for US farmers, but does not fully cover energy products, on which Trump has imposed a separate 10 per cent levy.
A White House official said that was because not all energy products imported from Canada were covered under the US-Mexico-Canada Agreement on trade Trump negotiated in his first term as president.
Trump imposed the tariffs after declaring a national emergency on January 20, his first day in office, due to deaths from fentanyl overdoses, asserting that the deadly opioid and its precursor chemicals make their way from China to the US via Canada and Mexico.
Trump has also imposed tariffs of 20 per cent on all imports from China as a result.
Trump first announced the levies at the beginning of February, but he delayed them for Canada and Mexico until Tuesday. Earlier this week he declined to delay them again, and doubled a 10 per cent levy that had been in force since February 4 on Chinese imports.
"On April 2, we're going to move with the reciprocal tariffs, and hopefully Mexico and Canada will have done a good enough job on fentanyl that this part of the conversation will be off the table, and we'll move just to the reciprocal tariff conversation," Commerce Secretary Howard Lutnick told CNBC. "But if they haven't, this will stay on."
Trump also said 25 per cent tariffs on imports of steel and aluminium would go into effect as scheduled on March 12.
Canada and Mexico are both top exporters of the metals to US markets, with Canada in particular accounting for most aluminium imports.
On Wednesday, Trump exempted automotive goods from the 25 per cent tariffs he imposed on imports from Canada and Mexico as of Tuesday, levies that economists saw as threatening to stoke inflation and stall growth across all three economies.
Trump issued those exemptions after meeting with executives from the top US auto makers, Ford, General Motors and Stellantis.
US stock markets resumed their recent sell-off on Thursday, with investors citing the rapid-fire, back-and-forth developments on tariffs as a concern due to the uncertainty they are fanning.
Economists have warned that the levies may rekindle inflation that has already proven difficult to bring fully to heel, and slow demand and growth in its wake.
The S&P 500 closed down 1.8 per cent and is now down nearly 7 per cent since mid-February.
"A continuation of this on again, off again with tariffs particularly with Mexico and Canada" was what is creating uncertainty in markets, said Bill Sterling, global strategist at GW&K Investment Management in Boston.
"The rational economic response to business leaders when there's such a high degree of uncertainty is to sit on their hands and just defer making decisions," Sterling said.
Mexican and Canadian officials have been frustrated by tariff negotiations with the Trump administration, with a lack of clarity over US desires making a resolution seem impossible, sources from both countries told Reuters.
