Trump to Announce Tariff Exemptions for USMCA-Compliant Goods

Commerce Secretary Howard Lutnick hinted at upcoming action from President Donald Trump regarding the recently imposed 25% tariffs on most goods imported into the U.S. from Mexico and Canada. These tariffs were put in place on March 29, 2023, and their implementation led to immediate repercussions, including a sell-off in stocks and warnings from companies about potential price increases on a wide range of goods.

Possible Exemptions and Tariff Duration

During an interview on CNBC, Secretary Lutnick revealed that he anticipated an announcement later that day, indicating a broad exemption from the tariffs for goods compliant with the United States-Mexico-Canada Agreement (USMCA). According to Lutnick, the proposed exemption would be in effect for one month, followed by the imposition of additional tariffs on April 2, 2023, when President Trump is expected to unveil a comprehensive package of reciprocal tariffs.

Impact of the Tariffs on Businesses

The 25% tariffs imposed on goods imported from Canada and Mexico has had a profound impact on businesses, triggering a sell-off in stocks and prompting warnings from companies about potential price hikes on a wide array of products. Among the items likely to be affected are alcohol, fresh ((produce), cars, and new homes, with some estimates suggesting that the additional costs from the tariffs could add $4,000 to $10,000 to the price of cars made in North America, according to estimates from Anderson Economic Group.

Underlying Reasons and USMCA Compliance

When announcing the tariffs, President Trump cited the desire to pressure Canada and Mexico into taking more vigorous measures to combat the flow of fentanyl into the U.S., despite the fact that less than 1% of fentanyl seized at the U.S. border reportedly originated from Canada. Secretary Lutnick had previously stated that the tariffs would remain in place until there was a noticeable decline in fentanyl-related deaths. However, he also mentioned that President Trump expressed satisfaction with the efforts pledged by Canada and Mexico to address the fentanyl issue.

USMCA Compliance and Future Developments

The USMCA trade deal, which President Trump hailed as a negotiating triumph during his first term, permits the tariff-free movement of goods between the three countries as long as they meet specific qualifications designating them as made in North America. This aspect of the USMCA could play a pivotal role in determining the future course of the recently imposed tariffs and any potential exemptions. President Trump is expected to engage in discussions with Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum to further address these issues and explore potential avenues for resolution.