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Donald Trump's administration has further setbacked from the threat of wiping out 25% tariffs on Mexico and Canada on a massive climb from aggressive trade agenda.
On his second U-turn of two days, the US President signed an executive order that stated that all goods that meet the rules of the 2020 free trade agreement with US neighbors will be given a month's reprieve from duties.
On Wednesday, Trump said USMCA-compliant carmakers will be given a one-month carve-out.
The policy change said “There's going to be a bit of a hindrance, but that's fine,” after Trump doubled his tariff plans in his speech to Congress this week.
Taxation on Tuesday prompted a response from turbulent markets after Canada and Mexico announced plans for retaliation. After a further decline on Thursday, all post-election profits for the S&P 500 have been erased.
Trump's Secretary of Commerce Howard Lutnick said on Thursday that stock market movements would not drive US trade policies.
“The fact that the stock market rises or rises in half on a certain day is not the driving force behind our outcome,” Rutnick said.
He added that he wanted to promote “factory production in the United States.”
“We want to blossom jobs in America. We want to train in the new AI industrial revolution that will take place in America,” Lutnick said.
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The change in the Trump administration is the latest in the chaotic policy developments that have shaken American trading partners. According to US trade representatives, US trade in goods and services under the USMCA totaled around 1.8 tonnes in 2022.
Washington's latest move comes hours after data showed that the US trade deficit in January had swelled from a $98.1 billion deficit in December to a $131.4 billion record. The economists said the increase is for some for businesses stocking up goods before tariffs are imposed.
On Thursday, Latnic said Canada and Mexico hope that the tariff deferral plan on April 2 will fully advance Trump's demands to crack down on trafficking of the deadly opioid drug fentanyl.
If so, he said, “This part of the conversation will go off the table and it will move on to reverse customs conversation.”
Trump said he plans to impose so-called mutual tariffs on trading partners starting April 2 in order to retaliate against taxes, tax collections, regulations and subsidies that Washington deems unfair.
Lutnick's comments sparked profits in Canadian and Mexican currencies. The Canadian dollar rose 0.4% against greenback to 1.4282. The Mexican peso has 0.7% against the dollar to 20.24.
US stocks were volatile on Thursday, with the S&P 500 down 1.5% with early afternoon trading in New York and high-tech NASDAQ composite trading.
