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With President Donald Trump telling Americans on Tuesday that tariffs are about the soul of the U.S. and warning that there could be a “little disturbance” as the economy adjusts, investors are increasingly wondering whether, and how, more trouble on the trade front can be avoided.
The Trump administration levied 25% tariffs on Mexico and Canada and another 10% on China this week, sparking retaliation plans by the targets and rattling markets on Tuesday. Stocks gained on Wednesday on expectations that some of these levies could be lowered, and the White House likely fueled that view with an announcement that imports of autos from Canada and Mexico won’t face tariffs for a month.
Canada and Mexico may be closer to finding a more far-reaching off-ramp than China. For America’s neighbors, the way to a respite from the tariffs on a combined $900 billion of exports to the U.S. may be through stepped-up efforts to curb fentanyl flows, though Washington’s ultimate aims appear to be broader.
Analysts see the wrangling with Canada and Mexico as about more than just fentanyl. Many see it as a step toward speeding up the renegotiation of the U.S.-Mexico-Canada trade agreement, struck during Trump’s first term, which is up for review next year. A renegotiation would allow the administration to tackle the problem of transshipments that has allowed China to circumvent some trade and technology restrictions the U.S. has imposed.
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