U.S. President Donald Trump has temporarily suspended the 25% tariff on Canadian and Mexican imports but kept the 10% tariff on Chinese goods. Canadian Prime Minister Justin Trudeau reacted on social media, but let’s break down what this really means:

1. Canada Talks Tough but Acts Cautiously

Despite strong words, Canada quickly adjusted once Trump was elected. They tightened border controls and even shared their progress with him. Trudeau personally met Trump at Mar-a-Lago, showing Canada’s willingness to cooperate on trade issues.

2. Tariffs Hurt Canada More Than the U.S.

The U.S. economy is much larger than Canada’s, so tariffs hit Canada harder. The trade relationship is not balanced, making Canada more vulnerable.

3. Trump Used Non-Economic Reasons for Tariffs

Trump justified the tariffs on Canada by citing illegal immigration—an issue that isn’t directly trade-related. This gave him two advantages:

• He could use executive power to enforce tariffs under the pretext of a “national emergency.”
• He could define “solving” the immigration problem however he wanted. Since the U.S.-Canada border isn’t a major source of illegal immigration, Canada could easily comply by showing effort rather than making real policy changes.

4. Trudeau’s Political Troubles

Trudeau is facing declining support in Canada, especially due to his immigration policies. Many critics blame him for worsening U.S.-Canada relations, arguing that his left-leaning policies caused unnecessary conflicts with Trump.

5. The U.S.-Canada Trade Relationship Is Deeply Connected

Canada supplies the U.S. with essential resources like oil, making them economically intertwined. Many U.S. refineries are specifically designed to process Canadian oil, and Trump supports the fossil fuel industry. So, despite tensions, a complete trade breakdown was unlikely.

6. Canada’s Concession Puts Pressure on Mexico

By resolving its tariff dispute with Trump, Canada left Mexico alone in negotiations. Smaller economies like Mexico can only stand up to the U.S. if they unite, but Trump’s strategy was to divide and conquer. With Canada cooperating, Mexico had fewer options.

7. Trump’s Focus: Fossil Fuels and Automobiles

Trump mainly cares about two industries: fossil fuels and cars. The U.S. auto industry relies heavily on Mexico for manufacturing and supply chains. If tariffs hit Mexico too hard, U.S. car companies and jobs would suffer, making it a politically risky move for Trump.

8. Trump’s Strategy Was Carefully Planned

Trump knew what he was doing by targeting Canada and Mexico first:

• He linked tariffs to issues like immigration and fentanyl, which align with his political promises.
• He set a precedent for using tariffs in non-trade disputes.
• He picked economically weaker countries that depend on U.S. trade.
• He wanted to show both U.S. voters and other countries that his tough trade policies work.

9. A Political Win for Trump?

If Canada and Mexico back down, it strengthens Trump’s position. However, this success comes at a cost: damaging alliances and breaking international trade rules.

10. The Bigger Picture: China Is the Real Target

Trump’s trade war isn’t just about Canada and Mexico—they were the warm-up. His real focus is China. While Canada and Mexico could be pressured individually, China will require a different strategy.

Key Takeaways:

• Trump’s tariff strategy won’t improve U.S. relations with other countries.
• Countries affected by U.S. tariffs will look for alternative trade partners.
• The old global trade system, led by the World Trade Organization, has been disrupted.
• U.S. isolation from allies could create more opportunities for China.

Now, the big question is: how will China respond?