President Donald Trump’s recent tariff threats against Canada and Mexico triggered immediate retaliation, market turbulence, and a strategic retreat, underscoring the interconnected risks of trade disputes.
Trump initially imposed 25% tariffs on most imports from Canada and Mexico (plus 10% on Canadian energy) to pressure border security concessions. And both nations swiftly retaliated.
Canada announced 25% tariffs on $155 billion CAD ($107 billion USD) of U.S. goods, targeting alcohol, furniture, and agricultural products. And Mexico pledged “tariff and non-tariff measures,” though specifics were delayed.
Facing economic backlash, Trump paused tariffs for 30 days after securing agreements to bolster border enforcement, including Mexico deploying 10,000 troops to its northern border.
The “deals” secured in exchange for the delay were largely symbolic:
- Mexico’s border troop deployment and Canada’s $1.3 billion border security plan were extensions of existing policies under President Biden.
- No substantive progress was made on immigration or fentanyl, the stated rationale for tariffs. Analysts criticized the measures as insufficient to justify the economic disruption.
Here's what the press refuse to say.
— Don Winslow (@donwinslow) February 3, 2025
1. Trump backed down from fights with Canada and Mexico when they fought back.
2. Trump got nothing for it.
3. The stock market crashed.
4. Trump announces gains from Mexico+ Canada that were already there or happened under Biden.
As a result of all of the commotion, stocks plunged globally on fears of a protracted trade war. The Dow Jones fell 1.36% (600+ points), while the S&P 500 and Nasdaq dropped 1.6% and 1.8%, respectively. And automakers (GM -7%, Ford -4%) and tech firms (Nvidia -4%) were hit hardest due to cross-border supply chains.
Markets partially rebounded after tariff delays were announced, with the Dow trimming losses to 0.2% by close.
President Biden got this exact deal — 10,000 troops deployed to the border — at the start of his term without tanking the market. https://t.co/G77d0jZDLC
— Zac Petkanas (@Zac_Petkanas) February 3, 2025
While the pause averted immediate escalation, retaliatory tariffs and supply-chain disruptions loom if negotiations fail. The Brookings Institution warned that prolonged tariffs could reduce U.S. GDP by 0.5%, inflate prices, and weaken North American competitiveness against China.
In summary, Trump’s tariff gambit yielded minimal concessions, destabilized markets, and highlighted the fragility of North American trade integration. The episode underscores how retaliatory measures and investor skepticism can swiftly counter protectionist tactics.