Inside the chaotic run-up to Trump’s tariff U-turn

Mexican President Claudia Sheinbaum pledged national guard troops to help stop migration into the U.S. Photo: Mauricio Palos/Bloomberg News
Mexican President Claudia Sheinbaum pledged national guard troops to help stop migration into the U.S. Photo: Mauricio Palos/Bloomberg News

Summary

The past 48 hours of tariff policies have stunned markets and boardrooms across the world.

WASHINGTON—On Thursday afternoon, less than 48 hours before President Trump was scheduled to slap tariffs on Canada and Mexico, White House chief of staff Susie Wiles got on a call with representatives from nervous automotive companies.

The administration, the firms were told, was considering a carve-out for cars that comply with Trump’s North American free-trade deal—the main request of domestic automakers—according to people familiar with the call. The automakers came away feeling better about their chances of avoiding tariffs, the people said.

Less than an hour later in the Oval Office, Trump appeared to undermine his aides who were working to dial back his universal tariff threat, saying there was nothing the countries could do to stop the tariffs—and mentioned nothing about an automotive exemption. On Saturday, he said he would impose 25% tariffs on those countries—no exceptions, except for Canadian oil, which he hit with a 10% levy. Trump also announced additional 10% duties on China.

Then on Monday, the White House whipsawed again. Trump agreed to delay tariffs on Mexico for a month after a phone call with Mexican President Claudia Sheinbaum in which she pledged national guard troops to help stop migration into the U.S.—an increase on offers Mexican diplomats had made the week before.

Canadian Prime Minister Justin Trudeau, later Monday, said Trump’s tariffs on his nation were also delayed. “Canada is implementing our $1.3 billion border plan—reinforcing the border with new choppers, technology and personnel, enhanced coordination with our American partners, and increased resources to stop the flow of fentanyl," he said on X after a Monday call with Trump. “Proposed tariffs will be paused for at least 30 days while we work together."

Trump’s tariffs on China were still slated to go into effect Tuesday.

Even for someone as unpredictable as Trump, the past 48 hours of tariff policies have stunned markets and boardrooms across the world. His moves underscored to corporate leaders and foreign officials that he is willing to threaten major economic disruptions—including price increases for people who voted for him in part to lower inflation—to make his point about what he sees as unfair trade practices and other issues such as fentanyl smuggling and illegal border crossings, both the stated motivations for this round of tariffs.

On Monday, Trump aides tried to play down the aggressiveness of his trade actions, with National Economic Council director Kevin Hassett saying on CNBC that this is a “drug war," not a “trade war" and that the media and Canadian government were interpreting the tariff orders incorrectly.

The boldness of his Saturday move—which came over the considerations of aides such as Stephen Miller and Treasury Secretary Scott Bessent, who people familiar with the matter said had pushed for more limited measures—reflect a president emboldened to enact an unabashed protectionist economic agenda.

Miller expressed concern that excessively antagonizing Mexico could jeopardize the country’s ongoing cooperation to interdict migrants attempting to reach the U.S. border, some of the people said. And Bessent had pushed to have the tariffs start at a lower level and increase over time, other people said.

In a statement, Miller said: “America must pursue the most aggressive possible line with Mexico in defense of our territory and sovereignty," calling Trump’s tariffs “an absolute necessity to protect the lives of our people and they have already delivered unprecedented security gains. Whatever it takes is what must be done—nothing less."

Trump, flanked by Bessent and Commerce Secretary nominee Howard Lutnick, reiterated in the Oval Office on Monday that he wants to see Canada become the 51st state, rather than an independent nation, and that he would rather see cars made in Detroit or South Carolina than north of the border.

As discussions played out this past Thursday, industry lobbyists representing suppliers and manufacturers were gathered a mile away from the White House inside the Washington, D.C., convention center, fretting about the looming threat of extra duties.

“Even the threat of tariffs has the potential to be catastrophic," said Bill Long, chief executive of MEMA, the vehicle suppliers association.

Long said the car industry could become crippled in short order if even one major supplier is kneecapped by added tariffs. “If it becomes real, it will make a dent," Long had said.

Trump’s aides privately considered various off-ramps from the president’s pledge for universal tariffs on America’s three largest trading partners—such as tariffing only certain sectors, allowing a grace period before duties were imposed, or exempting major sectors such as cars. But Trump went with the maximalist approach to his tariffs anyway—at least at the outset.

The automotive industry was just one sector pursuing tariff carve-outs last week. U.S. energy firms and unions also pushed to exempt Canadian energy products—particularly oil—from the tariffs, pointing out that a number of U.S. refineries rely on Canadian crude oil. The energy sector ended up without an exemption but was hit with lower tariffs than the rest of the Canadian and Mexican imports.

Nevertheless, the United Steelworkers, who lobbied for an oil exemption to protect their members working in refineries, decried the tariff action, saying that “lashing out at key allies like Canada is not the way forward."

Senior Canadian negotiators said it has been difficult to get a clear read on what Trump wants, even when they talk to his most senior advisers.

“We’ve talked to many, many people who are in the administration, or who are about to be confirmed, but everybody’s got a different story," said David MacNaughton, former Canadian ambassador to the U.S., who helped negotiate the USMCA deal for Canada, and is now acting as a senior adviser on the current negotiations. “It’s frustrating."

Sheinbaum said Monday that during her call with Trump he brought up his longstanding concern about the trade deficit that the U.S. has with Mexico. “I told him that in reality it wasn’t a deficit," she said, pointing to the U.S., Mexico, Canada agreement that Trump himself signed in 2018 as an increasingly efficient tool to compete with China and other trading blocs.

Sheinbaum said Trump then agreed to set up a bilateral working group in charge of elaborating an action plan to tackle security, migration and trade issues.

At the end of the conversation, Sheinbaum said that Trump asked her how long she wanted to put the tariffs on hold. “Well, let’s put it on hold forever," Sheinbaum responded. Then Trump insisted: “Well, how long?"

“Well, let’s put it on hold for a month," Sheinbaum said she told Trump. “And I’m sure that, in this month, we’ll be able to deliver results."

The whiplash caused by Trump’s tariff threats played out on corporate earnings calls Monday, as analysts and executives tried to parse the new developments.

During a call with investors to discuss the latest results at the kayak and camping-gear maker Johnson Outdoors, one analyst relayed the latest twist to company leaders.

“There was some new news actually, just actually shortly before 11 a.m.," said Anthony Lebiedzinski, an analyst with Sidoti. “Looks like the Mexico tariffs are being paused for a month actually. It was just announced actually about half an hour ago."

Johnson Outdoors’s chief financial officer, David W. Johnson, responded that he saw the situation as dynamic.

“Things change pretty quickly," Johnson said. “More to come as we learn more and as we know where the dust is going to settle here."

While Johnson Outdoors manufactures much of its products at factories in the U.S., it imports components from overseas and does business with China, Mexico and Canada.

“Rest assured," Johnson said. “We’re working on mitigation strategies."

Michelle Hackman, Vipal Monga, Santiago Pérez and Josh Dawsey contributed to this article.

Write to Gavin Bade at gavin.bade@wsj.com, Ryan Felton at ryan.felton@wsj.com and Chip Cutter at chip.cutter@wsj.com

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