Mexico Tariffs Delayed Amid Market Tumult: Trade War Updates

While many of his Republican colleagues in both chambers have explicitly weighed in on Trump’s decision to levy taxes against America’s neighbors in one way or another, Senate Majority Leader John Thune appears to be taking more of a wait and see approach.

HeatMap took a look at that question a few days ago:

The U.S. generally imports electricity from Canada in two different ways. Some of it is part of a “firm contract.” For example, the New York grid operator has a contract with Hydro-Quebec, a Canadian hydropower company, through 2030, to import up to 900 megawatts of capacity at a fixed rate. Hydro-Quebec also has an agreement with Vermont to supply about 25% of its annual electricity needs through 2038. John-Thomas Bernard, an energy economist at the University of Ottawa, told me that for those contracts, if the 25% tax applied, it would be passed directly onto customers.

But most of the electricity the U.S. consumes from Canada is purchased in a daily or hourly market, where U.S. grid operators just buy whatever is cheapest. Tariffs would essentially force Canadian producers out of that market, Bernard said. “The bulk of what would have to be replaced on the U.S. side will come from gas.”

Whether this would produce a noticeable cost increase for consumers would largely depend on the price of natural gas.

The tariffs and conflict have prompted wall-to-wall news coverage in Canada, where government officials aren’t the only ones coming up with trade-war action plans. It’s also become a nationalistic phenomenon on social media, where calls for buying Canadian and boycotting American have proliferated for weeks.

And it’s become a reason to boo the Star Bangled Banner:

And it’s motivating grocery store activism to highlight Canadian brands. Also, since it’s Canada, the crisis is also fueling comedy:

Speaking from the Oval Office, Trump told reporters that he had a “good talk” with Canadian Prime Minister Justin Trudeau this morning but reiterated his belief that the United States is “not treated well by Canada.”

When asked what Canada could do to change his mind on the tariffs, Trump once again floated the idea of them becoming part of America. “What I’d like to see? Canada become our 51st state,” he said.

CBS reports that Trump intends to speak with China within the next 48 hours. He told reporters that the 10 percent tariffs will increase if his administration is unable to reach an agreement.

In response to Trump’s planned 25 percent tariffs on Canada, leaders in Ontario, Nova Scotia, Manitoba and British Columbia have announced plans to remove American-made liquors from shelves with some even urging Canadians to boycott American alcohol altogether.

On social media, Ontario premier Doug Ford said the Liquor Control Board of Ontario will begin removing American alcohol from its store shelves as well as its catalogues which are used by restaurants and other retailers. “There’s never been a better time to choose an amazing Ontario-made or Canadian-made product,” he said.

Bourbon drinkers, however, are screwed.

That’s not clear. The New York Times reports:

A senior Canadian government official familiar with the call between President Trump and Prime Minister Justin Trudeau this morning said that they were not optimistic about the possibility that Canada would be able to get a reprieve from tariffs similar to that of Mexico, but that the situation was still in flux. The two leaders are due to speak by phone again at 3 p.m. Eastern.

The Dow dropped 665 points on Monday morning, but now it’s just down 141. There has been similar movement in the S&P 500 and Nasdaq.

According to President Sheinbaum, Mexico has cut a deal with the U.S. to delay the tariffs. Under the deal, she said Mexico is sending another 10,000 members of its national guard to the southern border to combat drug traffickers, while the U.S. has agreed to do more to prevent the trafficking of high-powered weapons to Mexico.

Trump confirmed the delay in a Truth Social post, but said a “deal” still needed to be agreed to, and he did not mention high-powered weapons:

Though he’ll surely declare victory anyway, this isn’t much of a substantive win for Trump or his tactics:

Congressional Democrats knocked Trump’s planned tariffs as a mistake that will only increase costs for the American consumer. “You’re worried about grocery prices. Don’s raising prices with his tariffs,” Senate Minority Leader Chuck Schumer wrote on social media. Senator Tim Kaine of Virginia shared a screenshot of a Wall Street Journal editorial criticizing the president’s action, writing, “What a disaster for American families and businesses.” More than 40 House Democrats signed onto a joint letter, calling on Trump to “immediately” rescind the tariffs against Mexico, China and Canada. “These broad tariffs will devastate Americans already struggling with high prices, kill jobs, and hurt diplomatic relationships with our closest partners,” the letter read.

As news of Trump’s planned tariffs hit Capitol Hill, many congressional Republicans defended the dramatic action from the president. House Speaker Mike Johnson said the tax on Canada, Mexico and China was holding the countries “accountable for their role in the flow of illegal aliens and illicit drugs across our borders.” Georgia Representative Marjorie Taylor Greene echoed his words, claiming that the countries contribute to the fentanyl crisis in America. “America is tired of getting kicked in the teeth by the rest of the world and Americans are fed up with American leaders that are weak and afraid. Tariffs are a powerful, proven source of leverage for protecting our national interest,” she said.

During an interview on Fox News Sunday, Republican Senator Lindsey Graham of South Carolina also backed Trump’s actions, but suggested he believed they would be temporary. “So these tariffs, I think, are designed to bring about change. And if the change comes, I think the tariffs probably go away,” he said.

Senator Rand Paul of Kentucky seemed less enthused about the new tariffs. “Tariffs are simply taxes. Conservatives once united against new taxes. Taxing trade will mean less trade and higher prices,” he said on social media. Iowa Senator Chuck Grassley issued a public plea to exclude a fertilizer product from the tariffs on the behalf of farmers:

The Dow quickly dropped by more than 600 points on Monday morning amid a global market tumble in response to the looming trade war. The S&P 500 and Nasdaq also fell.

Per CNBC before the bell, futures had taken a substantial hit, while the dollar was up, and the peso and Canadian dollar fell:

Futures tied to the Dow Jones Industrial Average fell 622 points, or 1.4%. S&P 500 futures dropped 1.6%, while Nasdaq-100 futures lost 1.7%. Futures on the Russell 2000, the small-cap benchmark, lost 2.1%. The Cboe Volatility Index, Wall Street’s fear gauge, briefly spiked above 22 before trading around 20.

The impact from the new tariffs ricocheted around the globe in a risk-off move:

• Major European equity markets sunk with Germany’s Dax benchmark off by nearly 2%.

• Bitcoin tumbled to around the 95,000 level from above $102,000 before the weekend. 

• Ether lost 11%.

• The ICE U.S. Dollar Index, a measure of the U.S. dollar versus several currencies, leaped almost 1%.

• WTI crude oil jumped 2% on concern of supply disruptions in North America from the new tariffs.

While Canadians are booing the U.S. national anthem at sporting events, the Canadian government is clearly trying to target its tariff retaliation to most hurt Trump. Politico reports:

There are 1,256 items in the first tranche of tariffs that will come into force on Tuesday. The list includes oranges and fruit from Florida, home to Trump’s Mar-a-Lago resort; household appliances from South Carolina and Ohio, states to Sen. Lindsey Graham (R-S.C.) and Vice President J.D. Vance; and motorcycles and coffee from southern Pennsylvania, which helped return Trump to the White House.

The full list, which you can read here, contains food and agriculture products, textiles and furniture. Energy and tech products were not included in the first round of tariffs. A second list will be published in the coming days. Government officials also said Ottawa is not ruling out other retaliatory measures such as targeting Elon Musk’s companies, or slapping export taxes on Canadian oil.

President Trump has been posting a lot to defend his plan to levy tariffs against Mexico, Canada and China as the international backlash continues to grow.

“Anybody that’s against Tariffs, including the Fake News Wall Street Journal, and Hedge Funds, is only against them because these people or entities are controlled by China, or other foreign or domestic companies,” he wrote on TruthSocial Sunday.

“Anybody that loves and believes in the United States of America is in favor of Tariffs.”

“WILL THERE BE SOME PAIN? YES, MAYBE (AND MAYBE NOT!),” Trump said in another post. “BUT WE WILL MAKE AMERICA GREAT AGAIN, AND IT WILL ALL BE WORTH THE PRICE THAT MUST BE PAID.”

As Canada announced its own retaliatory tariffs against the United States, Trump shot back, saying that America actually pays hundreds of billions of dollars to “subsidize” its Northern neighbor. “We have unlimited Energy, should make our own Cars, and have more Lumber than we can ever use. Without this massive subsidy, Canada ceases to exist as a viable Country. Harsh but true! Therefore, Canada should become our Cherished 51st State. Much lower taxes, and far better military protection for the people of Canada — AND NO TARIFFS!,” he wrote.

He says he’s imposing the tariffs to halt the flow of migrants (from Mexico and Canada) and illicit drugs like fentanyl (from all three countries) into the U.S. He also campaigned for president on the threat of using tariffs and trade warfare to achieve his goals.

As part of their justification for the tariffs, Trump and the White House are making widely exaggerated claims about the fentanyl crisis. They have inflated the number of deaths attributable to street fentanyl and other drugs, saying that drug cartels are killing at least 250,000 Americans a year. The actual number, per available evidence, is more likely half that or less. As NPR notes:

During the most severe period of the opioid crisis, in 2022 and 2023, total overdose deaths — including fentanyl, methamphetamines, heroin, cocaine and all other drugs — peaked at around 114,000 fatalities per year. And while drug overdose deaths have been wrenching for many families, fentanyl deaths haven’t come close to killing tens of millions of people.

State and federal data also shows the crisis was improving at an unprecedented pace before these tariffs were announced. Fatal overdoses from fentanyl and all other street drugs have plummeted nationally by more than 21% since June 2023, according to the latest data from the Centers for Disease Control and Prevention, falling below 90,000 deaths in a 12-month period for the first time in roughly half a decade.

And while Mexico is definitely a major source of street fentanyl in the U.S. — with 21,000 pounds of the drug seized at the southern border last year — Canada is not: only 43 pounds of fentanyl were seized at the northern border in 2024.

While the market effects are already real, the actual tariffs themselves won’t go into effect until Tuesday. So it’s all still preamble at this point.

Yes, though Trump and the White House continue to maintain there’s no stopping this tariff train.