Trump Administration Pauses Tariffs on Mexico and Automobiles

What Happened?

President Trump announced he was suspending tariffs on goods from Mexico until April 2, 2025. 

On a social media post Mr. Trump wrote “After speaking with President Claudia Sheinbaum of Mexico, I have agreed Mexico will not be required to pay tariffs on anything that falls under the USMCA agreement.” 

The United States-Mexico-Canada agreement was signed during President Trump’s first term in office.

Mr. Trump also granted a thirty day pause on tariffs on automobiles after U.S. automakers voiced concerns the proposed tariffs would cause extensive damage to American automobile manufacturers.

Why it Matters

The temporary pause on tariffs for goods imported from Mexico will cover about ninety percent of exports from Mexico to the United States. Items not covered by USMCA include some automobiles and machinery according to William Jackson, chief of emerging markets for Capital Economics. 

Mr. Jackson told the New York Times “In both cases this is because producers have found it burdensome to comply with the regional content requirements.” When the regulations are too cumbersome for certain items, companies would rather pay the additional tariffs than what it costs to attain compliance.

The impact of the pause on car tariffs was immediate for American auto manufacturers. Shares in Ford were up by more than 5% after the announcement, while General Motors shares rose more than 7%.  

According to the BBC “The new tariffs were poised to disrupt a third of car production in North America within a week.”

The U.S. stock market has seen increased volatility since the tariffs announced by the Trump Administration, and stocks rebounded slightly following Mr. Trump’s announcement of the thirty day pause.

While Mr. Trump’s Treasury Secretary Scott Bessent argued tariffs would not necessarily cause more inflation, Mr. Bessent has admitted the proposed tariffs could cause an increase in prices for American consumers. 

While tariffs can serve as a powerful negotiating tool, they can also increase costs for American businesses and consumers. About one half of all goods imported into the United States come from China, Canada, and Mexico. 

Tariffs, which are really just taxes by another name, imposed on imports are typically passed along to American consumers. 

Businesses have no choice but to raise their prices in order to offset the costs of government-imposed tariffs. President Trump has also acknowledged the coming price increases, arguing the gains will be “worth the pain.”

How it Affects You

Well over half of all vegetables and fruits purchased by American shoppers come from Mexico. 

If the new tariffs are reinstated, American consumers will likely see higher prices at their grocery stores. The money generated by tariffs represent a small fraction of the U.S. government’s revenue, meaning the main purpose of the tariff today is as a political and policy making tool not a source of income. 

Even if tariffs are successful as a policy making tool, American consumers will likely be the ones paying for it.