Cooling Period For Mexico And Canada As Trump Pauses Tariffs– Global Stocks Rebound, China Still In Limbo But Will It Bow Down To Trump And What’s India’s Tariff Deal So Far?

Mexico and Canada have scored a temporary win as U.S. President Donald Trump hits the brakes on steep tariffs for the next 30 days. In exchange, both nations have agreed to step up their efforts on border security and crime enforcement—two of Trump’s biggest talking points.

Why the Sudden Change of Heart?

Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum have both confirmed that their governments will intensify border enforcement to address immigration and drug smuggling concerns. That move has bought them some time, postponing the planned 25% tariffs, which were set to kick in on Tuesday.

The decision comes after a strong pushback from both Canada and Mexico, who were ready to slap their own retaliatory tariffs on U.S. goods. Within the U.S., there was significant opposition too, with critics warning that the tariffs would not only rattle the economy but also fuel inflation, making life costlier for American consumers.

Trump himself admitted that while the tariffs could cause short-term pain for U.S. consumers, he believes they are necessary to curb illegal immigration, combat narcotics trafficking, and boost domestic manufacturing. However, analysts argue that such tariffs would have impacted nearly half of all U.S. imports—something that would have required America to more than double its manufacturing capacity, which, let’s be real, isn’t happening overnight.

Some experts even predicted that the tariffs could have pushed Canada and Mexico into recession while triggering “stagflation”—a nasty mix of high inflation, stagnant growth, and rising unemployment—in the U.S.

The Small Steps That Led to a Win

So, what exactly did Mexico and Canada agree to in exchange for this tariff pause?

Canada will roll out new technology and deploy more personnel at its border with the U.S. It’s also committing to stronger cooperation in tackling organized crime, fentanyl smuggling, and money laundering.

Mexico is reinforcing its northern border with an additional 10,000 National Guard troops to clamp down on illegal migration and drug trafficking.

The U.S. has promised to take stronger measures to prevent the smuggling of high-powered weapons into Mexico—something Sheinbaum had been pushing for.

Trump took to social media to celebrate the deal, saying, “As President, it is my responsibility to ensure the safety of ALL Americans, and I am doing just that. I am very pleased with this initial outcome.”

For now, the agreement has prevented what could have been a full-blown trade war, which economists warned would have dented all three economies and led to higher prices across the board.

China Still in the Hot Seat

While Mexico and Canada have managed to buy some time, China isn’t getting any breaks. The 10% tariffs on Chinese goods are set to kick in at 12:01 a.m. ET on Tuesday (0501 GMT), with no sign of a deal in sight. The White House has made it clear—Trump won’t be talking to Chinese President Xi Jinping until later in the week.

And if China was hoping for a last-minute reprieve, Trump isn’t exactly sending hopeful signals. “China hopefully is going to stop sending us fentanyl, and if they’re not, the tariffs are going to go substantially higher,” he warned.

Beijing isn’t backing down either. Calling fentanyl an “American problem,” China has vowed to challenge the tariffs at the World Trade Organization and roll out countermeasures of its own. At the same time, they’ve left the door open for negotiations, suggesting they’re not entirely ruling out talks.

Trump’s Trade War

According to Julian Karaguesian, an economics professor at McGill University, Trump’s tariff pause for Canada came only after serious commitments from Prime Minister Trudeau to tighten border security. But don’t think this is the end of the story.

Karaguesian explained, “The Canadian government already had a $1.3 billion border security plan in the works, and today they committed to deploying that along with other measures. An additional 10,000 frontline personnel will be stationed at the border, and Canada has agreed to designate Mexican drug cartels as terrorist organizations.”

On top of that, a new Canada-U.S. joint strike task force is being formed to combat organized crime, along with the appointment of a ‘fentanyl tsar’ to tackle the crisis.

So, is this just another policy move, or is Trump making a spectacle to fire up his voter base? Karaguesian thinks it’s a bit of both.

“I don’t personally believe this is the end of the story,” he said. “But it’s also possible that Trump wanted to create a flurry of activity to show his base that he’s not just keeping his campaign promises—he’s doing it with extreme prejudice.”

India in the Tariff Ring

For all of Trump’s tough talk on tariffs, India seems to be in the clear—for now. The former president had previously floated the idea of imposing a staggering “100% tariff” on the BRICS bloc, India included. That sent some alarm bells ringing in New Delhi. But despite the rhetoric, the fundamentals of the U.S.-India relationship remain strong, with bilateral trade in goods and services soaring to $190 billion in 2023. At the moment, there’s “absolutely no threat” of any U.S. tariff measures against India, officials say.

Back home, India has been tweaking its tariff structure, hoping to shed the image of being a “high-tariff nation.” The latest budget scrapped some of the highest import duties—rates of 150%, 125%, and 100%—which applied to just five items but had created some bad PR.

Trump, who has often lumped India and China together as “tariff abusers,” had previously taken issue with these high rates. But as things stand, India’s peak customs duty has now dropped to 70%, and import duties on key U.S. exports—like crude petroleum, coking coal, liquefied natural gas, and even airplanes—remain low, hovering between 0% and 7.5%.

The government is also streamlining the tariff structure, bringing the slabs down from 15 to just eight (including zero tariffs). Finance Secretary Tuhin Kanta Pandey, who leads the Department of Revenue, pointed out that India is already “autonomously reviewing” its customs duty structure to make it more competitive.

“Our highest importables are all on lower rates… Even aeroplanes are taxed at just 2.5% plus 0.5%, and they’re zero-rated if imported by scheduled operators,” Pandey clarified.

The takeaway? India is making it clear—both to its industries and the world—that it is no longer a high-tariff country.

Global Reaction

Markets worldwide breathed a sigh of relief as Trump’s tariff threats against Mexico and Canada were put on hold for now. Industry groups, worried about disrupted supply chains, welcomed the pause, stating it’s very encouraging news, we have a highly integrated industry that benefits countries.

Trump, however, made it clear that he isn’t done yet. He hinted that the European Union could be his next target, though he didn’t specify when. EU leaders, meeting in Brussels, responded with a mix of caution and defiance—stating that while they’re open to negotiations, they’re also prepared to hit back if tariffs come their way.

Interestingly, Trump suggested that Britain—post-Brexit—might be spared.

The market reaction was swift- 

• U.S.: S&P 500 futures rose 0.6%, while the dollar pulled back after its earlier surge against the Mexican peso and the Canadian dollar.

• Japan: The Nikkei rebounded 1.5% on Tuesday, though it was still recovering from Monday’s 2.66% drop.

• Europe: EURO STOXX 50 futures bounced back, and the euro recovered to $1.0340 after touching a two-year low.

• Australia: The S&P/ASX 200 index opened 0.7% higher, reversing some of Monday’s 1.5% decline.

Will China Back Down?

For now, Trump isn’t letting up on China. He’s repeatedly accused Beijing of allowing fentanyl to flood into the U.S. and has used it as a justification for ramping up tariffs. White House Press Secretary Karoline Leavitt confirmed that Trump is set to speak with Chinese President Xi Jinping in the coming days—hinting that another deal could be in the works.

But even if China makes concessions, Trump has already turned his sights elsewhere, warning the EU: “Tariffs are coming for you.”

The Last Bit

Following phone discussions with Trudeau and Sheinbaum, Trump has signaled that he’s open to further economic negotiations over the next month. The U.S., Canada, and Mexico are deeply connected through trade, thanks to deals like NAFTA (now USMCA), and any long-term disruption could have serious economic consequences.

Meanwhile, China remains in a tough spot with its own tariff battles against the U.S. While Beijing has tried to push back—will it eventually bow down to Trump’s aggressive trade tactics?

And what about India? While not in the direct line of fire, India has been carefully navigating its own trade relationship with the U.S. and watching these developments closely. So far, New Delhi has managed to avoid any major tariff escalation, but with Trump’s unpredictable policies, nothing is off the table.

The next 30 days will be crucial. Will Mexico and Canada’s commitments be enough to avoid the tariffs altogether, or is this just a temporary reprieve before things heat up again? Watch this space.