Trump confronts pivotal decision on trade following tariff delay

In the first week of Donald Trump’s presidency, the issue of tariffs, a key topic during his election campaign, was conspicuously absent from the administration’s agenda. Instead, the new president prioritized other major issues like cracking down on immigration, granting pardons for those involved in the Capitol riot, pushing a pro-fossil fuel energy policy, and implementing changes within the federal workforce. Trade, which had played such a large role in his election rhetoric, seemed to take a backseat as Trump focused on these other high-priority concerns.

That all shifted over the past weekend, however, when President Trump announced significant tariffs: a 25% levy on goods from US allies Canada and Mexico, as well as a 10% tax on imports from China. Although he later decided to delay the implementation of the tariffs on Canada and Mexico for a month, following agreements from both countries to increase border security measures, the president now faces a crucial decision. Trump must ultimately decide whether to follow through on his tariff threats or allow the situation to diffuse, particularly given the possibility that his rhetoric may clash with his willingness to take concrete action.

One of the core reasons Trump has cited for his dissatisfaction with trade has been the US trade deficit with Canada and Mexico. He has made it clear that no amount of border security or drug enforcement measures will likely be enough to dissuade him from his ultimate goal of imposing tariffs. For Trump, tariffs are not merely a tool to negotiate trade deals; they are also seen as a potential permanent revenue source to help fund government programs and reduce the federal deficit. In this light, tariffs on major trading partners like Canada and Mexico could serve as one of the most effective means of achieving these long-term financial goals.

The prospect of an all-out trade war with some of its closest economic partners sent shockwaves through global financial markets on Monday. The US has extensive trade ties with Canada and Mexico—together, they accounted for over $1.57 trillion in goods traded with the US in 2023—and the potential fallout from a trade conflict could have had disastrous effects on the global economy. However, after talks with Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau, Trump chose to pause the planned tariffs for a month, citing the commitments from both countries to enhance border security. While the tariffs on China have already been put into effect—provoking retaliatory moves from Beijing—the effects of these measures are seen as less disruptive than those involving North America.

The potential economic fallout from escalating tariffs with Canada and Mexico would have been significant, but for now, that crisis has been averted. However, the concessions made by both countries to delay the tariffs reveal a more nuanced reality. Canada agreed to form a joint anti-crime task force with the US and appoint a “fentanyl czar,” but these measures were part of a broader border-security plan that Canada had already announced. Similarly, Mexico promised to increase drug enforcement and send 10,000 troops to patrol the US-Mexico border—steps that mirror commitments made in 2019 and 2021.

In one month, Trump will once again have to decide whether Canada and Mexico’s efforts are sufficient to meet his demands or if the delayed tariffs will be imposed. However, providing concrete proof of progress may prove difficult. By the administration’s own metrics, US immigration authorities only seized 43 pounds of fentanyl at the US-Canada border in 2024. While drug seizures and border crossings are higher on the US-Mexico border, these numbers have also shown a decline compared to previous years.

Since Trump’s initial tariff announcement, global markets have stabilized, with investors concluding that Trump’s trade policy may be more about rhetoric than actual implementation. Although he may be able to secure further concessions from Canada and Mexico in the coming weeks, there is a growing sense that they may start to question his resolve to follow through on his threats.

Ultimately, Trump’s approach to trade could result in diminishing returns if he continues with his heavy-handed tactics. When faced with a decision on whether to carry out his most aggressive tariff plans or abandon them entirely, Trump will be confronted with some key questions. Will he continue pursuing his vision of a new, more protectionist trade policy for America, despite the economic risks? Or will he acknowledge that his ideal of returning to late-19th-century trade policies—an era he has described as a “golden age” of American economic power—was unrealistic? The coming weeks will determine whether Trump can balance his trade rhetoric with real action or whether his trade policies will eventually fall flat.