Trump Delays Some of His Tariffs

(Reuters)
By Yuval Rosenberg and Michael Rainey

Economic anxiety was running high Monday as President Donald Trump's tariffs on the United States' three largest trading partners were set to take effect at 12:01 a.m Tuesday. Stocks dropped sharply to start the day but rebounded after Trump and Mexico's President Claudia Sheinbaum announced that tariffs would be delayed for a month while the two sides try to reach a deal. Trump later announced a 30-day pause on tariffs against Canada, too, but those against China are still set to hit tonight.

While economic fears were simmering, the president and Elon Musk continued their efforts to remake the federal government. Here's what you should know.

Trump Delays Tariffs on Mexico and Canada, With China Tariffs Poised to Take Effect

President Donald Trump announced Monday that he will delay for one month a 25% tariff on goods imported from Mexico and Canada scheduled to take effect at midnight, temporarily defusing a trade war with some of the U.S.'s largest trading partners. Trump's 10% tariff on goods from China is still scheduled to take effect on Tuesday.

Trump spoke to Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau via telephone during the day, with both leaders agreeing to send roughly 10,000 troops to their respective borders to crack down on illegal migration and drug smuggling into the U.S. As part of the agreements, both nations will hold off on retaliatory tariffs of their own. In addition, Sheinbaum said that the U.S. has pledged to take steps to help reduce the flow of high-powered, American-made weapons into Mexico, while Trudeau vowed to appoint a "Fentanyl Czar" to fight drug trafficking as part of a $1.3 billion border plan.

In a marked shift in tone from recent trade-related saber rattling, Trump said on social media that he had a "very friendly conversation" with Sheinbaum that resulted in the tariff delay. Negotiations over the next month will be led on the U.S. side by Secretary of State Marco Rubio, Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick, with Trump and Sheinbaum participating as well.

Addressing Canada, Trump said he was "very pleased with this initial outcome," adding that the announced tariffs would be delayed for 30 days "to see whether or not a final Economic deal with Canada can be structured."

Trade war threat remains: This past weekend, following weeks of critical remarks aimed at the U.S.'s largest trade partners, Trump formally announced the imposition of 25% tariffs against Mexico and Canada and 10% tariffs on China and Canadian energy.

"The extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl, constitutes a national emergency under the International Emergency Economic Powers Act," the White House said Saturday.

Economic pain ahead? Although Trump has largely portrayed tariffs as powerful negotiating tools with no downsides - the U.S. was the richest it has ever been when tariffs were high in the 19th century, Trump has insisted - economists have warned that tariffs generally depress trade and hurt consumers by raising prices. Trump appeared to acknowledge some of those concerns this weekend.

"THIS WILL BE THE GOLDEN AGE OF AMERICA! WILL THERE BE SOME PAIN? YES, MAYBE (AND MAYBE NOT!)," Trump wrote on social media. "BUT WE WILL MAKE AMERICA GREAT AGAIN, AND IT WILL ALL BE WORTH THE PRICE THAT MUST BE PAID."

Still, Trump continues to reject the notion that tariffs are harmful in the long run. Responding to an op-ed in The Wall Street Journal that referred to Trump's threatened tariffs as the "Dumbest Trade War in History," the president said that anyone who is "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."

Trump added that loving tariffs goes hand in hand with loving America, and that the 19th century tariff regime in the U.S. "should have never ended, in favor of the Income Tax System, in 1913."

**China vows response: **While stating that no one wins in a trade war, Chinese officials have vowed to take countermeasures if the U.S. imposes a new tariff on all imports from China, as scheduled. While those countermeasures were left undefined, China's Ministry of Commerce said that it also plans to file a legal case with the World Trade Organization.

"The unilateral tariff increase by the United States seriously violates WTO rules," the ministry said. "It is not only unhelpful in solving its own problems, but also undermines the normal economic and trade cooperation between China and the United States."

However, as NBC News notes, the WTO no longer has the ability to try legal cases, following Trump's block on appointing new judges during his first term in office.

What does Trump want? While Trump has declared that reducing drug trafficking and illegal immigration are his prime motivations in raising tariffs, critics have noted that one of his targets has little to do with either of those issues.

"This is ridiculous. Canada is not a real source of fentanyl, it's not a real source of immigrants, it's certainly not ripping us off," economist Peter Morici, a former director of the Office of Economics at the U.S. International Trade Commission, told NPR. "The trade is based on comparative advantages, based on economic efficiency, and it makes us and them live better. ... It isn't clear what Trump really wants."

More broadly, critics have wondered why Trump is threatening a trade war with allies like Canada and Mexico. One topic that keeps coming up is the expansion of U.S. borders, and Trump returned to that idea on Monday, though it's not clear why. "What I'd like to see, Canada become our 51st state" so it can avoid tariffs, Trump said when asked what the country could do to avoid a trade conflict.

An administration insider told Politico that the broader economic issues involved in trade may be at least as important to Trump as the more immediate problems of drugs and migration, suggesting that the threat of a trade war is still very much in play. "He's also going to want to see the movement on the deficit," the unnamed insider said referring to Trump's long-term goal of raising funds through tariffs to help pay for tax cuts and reduce the budget deficit. "I think for legal reasons they need to keep saying it's about fentanyl and migration but they're going to get into other issues as well. There's no way the president is going to go, 'The fentanyl problem is fine, no tariffs.'"

Trump and Musk Move to Shutter USAID

The Trump administration on Monday reportedly moved to shut the U.S. Agency for International Development (USAID), putting many agency staffers on leave and locking out workers in a push that prompted backlash and a protest in front of agency headquarters.

Secretary of State Marco Rubio said that he was now the acting director of the agency, which distributes billions of dollars a year in humanitarian assistance. Rubio told reporters that USAID has been "completely unresponsive" to State Department policy directives, has ignored U.S. national interests and that its officials had been insubordinate, refusing to cooperate with Trump administration questions about its programs.

"We're spending taxpayer money here," Rubio said. "These are not donor dollars. These are taxpayer dollars, and we owe the American people the assurances that every dollar we are spending abroad is being spent on something that furthers our national interest. And so far, a lot of the people that work at USAID have just simply refused to cooperate."

The State Department said in a news release that Rubio had notified Congress "that a review of USAID's foreign assistance activities is underway with an eye towards potential reorganization." The State Department said the goal was to ensure that the agency is in alignment with the president's American First agenda and does not waste taxpayer money.

Rubio reportedly named Peter Marocco to oversee the agency. The Associated Press reports that Marocco "is a political appointee whose short stint at USAID in the first Trump administration generated unusual staff protests for pushing program cuts and investigations that ambassadors and other senior officials complained slowed work to a crawl."

Trump calls USAID 'radical left lunatics': President Trump ordered a freeze on most foreign aid when he took office. On Monday, he accused USAID of "tremendous fraud" and called its employees "radical left lunatics." He told reporters he believes he has the authority to do away with USAID, especially because of the fraud he alleges.

The administration has already been working to shutter the agency in recent days. "Senior officials have been suspended, and hundreds of civil servants and contractors have been iced out of U.S.A.I.D. systems without warning," The New York Times reports. "Many of the cuts were rolled out in secret and without warning, as representatives of Elon Musk, who was deputized by President Trump to lead a task force to reduce government spending, took over its operations despite objections from aid workers and Democrats in Congress."

Musk, the billionaire Tesla founder, has levied harsh criticisms against the agency, calling it a "criminal organization," "beyond repair" and saying it was "Time for it to die."

Democrats say they'll put up a fight: Democratic lawmakers responded by staging a protest at the agency headquarters, with two senators, Brian Schatz of Hawaii and Chris Van Hollen of Maryland, pledging to block confirmations of Trump's State Department nominees. "We will do everything we can to block State Department nominees from going forward until this illegal action is reversed," Van Hollen said.

And Rep. Jamie Raskin of Maryland pointed his criticism at Musk. "You don't control the money of the American people. The United States Congress does," he said at the agency headquarters.

Democrats on the Senate Foreign Relations Committee said in a letter to Rubio on Sunday asking for details about reports that employees of Musk's Department of Government Efficiency had accessed USAID headquarters and classified spaces. They also said that Congress had intentionally established USAID as an independent agency "to ensure that we can deploy development expertise and U.S. foreign assistance quickly," especially during crises.

"For this reason, any effort to merge or fold USAID into the Department of State should be, and by law must be, previewed, discussed, and approved by Congress," they wrote. "Congress has also made clear that any attempt to reorganize or redesign USAID requires advance consultation with, and notification to, Congress."

In an appearance on CNN, Democratic Rep. Sarah McBride warned that USAID is only one part of a larger, unconstitutional power grab: "If they can get away with this, with USAID, they can do it anywhere. And that means that no part of the federal government, including programs like Medicare and Social Security, will be safe from this administration. So it is illegal, and it is just the first stop on this administration's effort to undermine programs and benefits in order to line the pockets of uber-wealthy donors and friends of the president."

Trump Signs Order to Create Sovereign Wealth Fund

President Trump Signed an executive order on Monday directing the Treasury and Commerce Departments to begin the process of creating a sovereign wealth fund - an investment fund owned by the government.

"I think it's about time that this country had a sovereign wealth fund," Trump said. He reportedly also suggested that the fund could buy TikTok, the social media app owned by China-based ByteDance that was banned in the United States before Trump gave it a 75-day extension.

"TikTok, we're going to be doing something, perhaps with TikTok, and perhaps not, if we make the right deal, we'll do it," Trump said. "But I have the right to do that, and we might put that in the sovereign wealth fund."

It's unclear how the sovereign wealth fund might work or where it would get its funding. "Typically such funds rely on a country's budget surplus to make investments, but the U.S. operates at a deficit," Reuters notes. "Its creation also would likely require approval from Congress."

Trump has previously suggested that such a fund could be financed by "tariffs and other intelligent things."

"We're gonna stand this thing up in the next 12 months. We're going to monetize the asset side of the U.S. balance sheet for the American people," Treasury Secretary Scott Bessent told reporters in the Oval Office. "There'll be a combination of liquid assets, assets that we have in this country as we work to bring them out for the American people."

The Biden administration had reportedly also considered creating a sovereign wealth fund.

Reuters reports that, according to the International Forum of Sovereign Wealth Funds, there are more than 90 such funds globally that manage more than $8 trillion in assets.

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