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9 Feb 2025 20:29
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  •   Home > News > International

    Canada and Mexico have struck deals with the US to pause incoming tariffs. Here's what we know

    US President Donald Trump says he will pause tariffs on Canada and Mexico for a month, but levies on China are still set to take effect on February 4.


    US President Donald Trump has agreed to pause imposing tariffs on imported goods from Canada and Mexico, after threatening to bring them in from February 4.

    Mr Trump said the tariffs were needed to "protect Americans" from the deadly drug fentanyl and to limit any illegal immigration into the country.

    But he will now delay them after calls with the Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum.

    Here's what we know about the deals.

    What have Mexico and Canada agreed to do?

    President Trump and the leaders of Mexico and Canada have struck last-minute deals to postpone the imposition of 25 per cent tariffs on goods exported to the US.

    It took two telephone conversations with Mr Trudeau to cut a deal compared to the one with Ms Sheinbaum.

    As part of the arrangement, Ms Sheinbaum said her country would immediately deploy 10,000 members of its National Guard to their shared border to battle drug trafficking, especially fentanyl.

    She also said the agreement included a US commitment to act to prevent trafficking of high-powered weapons to Mexico.

    Mr Trump said he had a "very friendly conversation" with the president and looked forward to "participating in the negotiations" with Mexico.

    Canada also promised similar arrangements.

    "I just had a good call with President Trump," Mr Trudeau wrote.

    "Canada is implementing our $1.3 billion border plan — reinforcing the border with new choppers, technology and personnel, enhanced coordination with our American partners, and increased resources to stop the flow of fentanyl."

    The country will also establish a new position for a fentanyl czar and redouble its efforts to tackle the opioid crisis by listing cartels and gangs as terrorist entities.

    Mr Trump said he was very pleased with the initial outcome.

    "The tariffs announced on Saturday will be paused for a period to see whether or not a financial economic deal with Canada can be structured," he posted on his social media platform Truth Social.

    "Fairness for all!"

    How long have the Canadian and Mexico tariffs been paused for?

    The tariffs have been paused for 30 days, as the countries continue to negotiate. 

    Mr Trump asked Ms Sheinbaum how long she wanted to pause the tariffs for which she suggested forever.

    However, he said Mexico could have one month to show results to which Ms Sheinbaum said, "I am sure that in this month we are going to give good results".

    But while Canada and Mexico bought some additional time, Mr Trump could easily renew his tariffs.

    He already plans to announce taxes on imports from the European Union.

    Speaking with the BBC, Mr Trump said that tariffs "will definitely happen" with the EU and could come "pretty soon".

    The pauses provide a cool-down period after a tumultuous few days that put North America on the cusp of a trade war that risked crushing economic growth.

    What's happening with China?

    US tariffs (10 per cent) on China are still due to take effect within hours.

    But Mr Trump is due to speak with Chinese President Xi Jinping sometime this week.

    "It'll happen in the next couple of days," White House press secretary Karoline Leavitt said.

    The call will be the pair's first known talks since Mr Trump took office on January 20.

    He has previously said more import taxes could be coming against China if a deal cannot be made.

    "Then, the tariffs will be very, very substantial."

    China's foreign ministry said in a statement over the weekend that it "firmly deplores and opposes this [tariff] move" and will take "necessary countermeasures" at the World Trade Organization.

    Why did Trump impose the tariffs in the first place?

    To fulfil a campaign promise of introducing import duties against some of the US's biggest and closest trading partners.

    He argued the tariffs would grow the US economy, protect jobs and raise tax revenue.

    It is also to force the countries to do more to stop the flow of fentanyl entering the US and limiting any illegal immigration into the country.

    The president's administration says chemicals used to make the drug come from China while Mexican gangs supply it illegally and have fentanyl labs in Canada.

    What are tariffs?

    Tariffs are taxes charged on goods imported from other countries.

    Mr Trump initially said he would impose a 25 per cent tariff on goods from Canada and Mexico. So a product worth $4 would face an additional $1 charge applied to it.

    Who pays tariffs?

    Companies that import goods from abroad pay the tariffs to the US government. They typically pass their higher costs on to their customers in the form of higher prices.

    That is why economists say consumers usually end up footing the bill for tariffs.

    When the president said he would impose tariffs on Canada, Mexico and China, concern grew from economists that it would lead to higher prices for groceries, electronics and various other household expenses, which could put pressure on the US inflation rate.

    There are economic studies that show the impacts tariffs imposed by Mr Trump during his first term had on US consumers.

    For example, from 2018 to 2023, tariffs on imported washing machines saw the price of laundry equipment rise by 34 per cent in the US. When the tariffs expired, prices fell.

    What's the history of Trump's trade wars?

    Imposing tariffs is not new for Mr Trump.

    During his first term as president, he imposed tariffs on $283 billion of US imports, with rates ranging between 10 and 50 per cent.

    In response, several countries including China, Russia, Canada, Mexico and the EU all filed cases against the US with the World Trade Organization.

    Many of those countries retaliated with tariffs of their own.

    In 2019, Mr Trump also used the threat of tariffs as leverage to persuade Mexico to crack down on migrants crossing the border.

    ABC/AP

    © 2025 ABC Australian Broadcasting Corporation. All rights reserved

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