North America came within hours of a multibillion dollar trade war that was poised to hobble the economies of Mexico and Canada.The Times journalists Ana Swanson, Matina Stevis-Gridneff and Simon Romero discuss the last-minute negotiations that headed off the crisis — for now.Guests: Ana Swanson, who covers trade and international economics for The New York Times; Matina Stevis-Gridneff, the Canada bureau chief for The New York Times; and Simon Romero, an international correspondent for The New York Times based in Mexico City.Background reading: President Trump agreed to delay tariffs on Mexico and Canada for a month after both countries pledged to do more to block drugs and migrants.What does Mr. Trump really want from Canada and Mexico?For more information on today’s episode, visit nytimes.com/thedaily. Transcripts of each episode will be made available by the next workday. Photo: Jeff Kowalsky/Agence France-Presse — Getty Images Unlock full access to New York Times podcasts and explore everything from politics to pop culture. Subscribe today at nytimes.com/podcasts or on Apple Podcasts and Spotify.
Chapter 1: What were the last-minute negotiations that averted a trade war?
From The New York Times, I'm Michael Barbaro. This is The Daily. On Monday, North America came within hours of a multi-billion dollar trade war that was poised to hobble the economies of Mexico and Canada. Today... My colleagues, Anna Swanson, Matina Stevis-Gridneff, and Simone Romero, on the last-minute negotiations that headed off the crisis for now. It's Tuesday, February 4th.
So, friends, welcome. Ana, you are joining us from Washington, D.C., Matina from Toronto, Canada, and Simone from Mexico City. Thank you all for being here on very short notice. We appreciate it. Thanks. Thank you. Good to be here. Thanks for having us.
And the reason we wanted you to be here is because we want to make sense of a very fast-moving story playing out in all three of the countries where you are based, involving the leaders from each of those countries that brought us to the verge of... a historic and very consequential trade war between them. Ana, I want to start with you.
Chapter 2: What were President Trump's original tariff plans?
What had been President Trump's original plan for what this morning would look like, the plan before the plan changed?
Yeah, his plan was to impose sweeping tariffs on America's three biggest trading partners, So a 25% tariff on Canada and Mexico virtually across the board, except a lower tariff on Canadian oil and 10% tariff on China. And that would include everything from cars, lumber, natural gas, beer, vegetables. pretty much everything that we're importing from those countries.
Okay, and let's put China aside for just a moment, since it has felt like this was primarily about our neighbors to the north and south, Canada and Mexico. I want to put the impact of 25% tariffs into perspective for both countries, as conceived of over the past few days by Trump. What would it do to each of them and, in turn, China? I guess, to U.S. consumers. Martina, let me start with you.
Chapter 3: What would 25% tariffs mean for Canada and Mexico?
Well, Michael, we should start by saying that the three economies have just been so deeply integrated because of existing free trade agreements that have been put in place and then renegotiated over the past several decades. And so for Canada specifically, the impact would be catastrophic. Economists predict that such tariffs would tip the Canadian economy into a recession.
And we could see hundreds of thousands of jobs lost. For example, in the province of Ontario, which is the heart of the Canadian automotive industry, the predictions are that up to half a million people could lose their jobs. So it would be truly meaningful and devastating for the Canadian economy and for Canadians.
And, Simon, putting aside the developments of Monday for just a moment, in theory, what would 25 percent tariffs mean for Mexico if slapped on it from the United States?
You know, there really was a huge amount of fear and trepidation about these tariffs. There was the expectation that they would cause a devastating blow to Mexico's economy. And this is really mainly because, you know, Mexico, more than any other major economy in the world, relies on trade with the United States. Mexico exports 80% of its exports to the U.S.
So it was just extremely vulnerable going into this situation. There was an expectation that it could take two percentage points off of GDP in Mexico. That would essentially push the economy into a recession. So there was a great deal of concern about the impact that this could have.
Right, and I can see why. We're talking about two recessions here, one in Canada, one in Mexico, if these tariffs were to go and affect his plan. And Ana, what was the stated rationale from President Trump for these tariffs against Canada and Mexico?
Well, according to the president, it's been pretty much all about the border. So he really was trying to pressure these countries, he said, to do more to stop flows of migrants and to stop shipments of fentanyl coming across the border. However, in the last couple of days, he also kind of mixed in the trade deficit.
He said that these countries sell a lot more to the United States than they buy from them, and they would also have to fix that problem. number one domestic policy issue right now.
Right. And those are, of course, claims that we tend to associate with Mexico, not so much with Canada. So just from a fact-checking perspective, Matina, how real an issue are migrant border crossings and fentanyl entering the United States from Canada?
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Chapter 4: How did Canada respond to the threat of tariffs?
What's an example of one of the products that he would tariff in a retaliatory manner at 25%? It might be kind of interesting to name it.
Bourbon, chickens, tomatoes, dishwashers. It's a long list of goods.
Meant to hit, it sounds like, Americans at different geographies and it seems like income levels.
Absolutely. And in briefings and interviews I've done with Canadian officials through the run-up to the tariff imposition, they had made it clear that those tariffs were surgically selected in order to hit particularly red and purple states to make sure representatives there would pick up the phone and call Mr. Trump and say, please make this stop. It's hurting us.
Bourbon, of course, Kentucky, Senator Mitch McConnell, Republican. Simone, what's the reaction from Mexico's leader when Trump lays this out and says, it's going to happen, it's going to happen fast, it's going to happen big?
Well, it was really interesting. Mexico's president, Claudia Sheinbaum, had quite a measured response to the announcement of these tariffs. I think we have to remember this isn't Mexico's first rodeo with Trump. Members of her administration have been through this experience during the first Trump administration when tariffs were imposed on some Mexican products and Mexico retaliated at that time.
And they ended up actually renegotiating the entire free trade deal. agreement for North America. And really, it ended up being quite advantageous for Mexico in the end.
However, it was a challenge for her to respond over the weekend because in Trump's executive order, he made a remark that was kind of incendiary in Mexican politics when he said that the Mexican government has an allegiance with drug cartels. That's kind of an explosive statement to make. And so she pushed back on that. She also said something really interesting.
Why don't they start fighting the sale of stupefacients in the streets of their main cities?
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Chapter 5: What was Mexico's reaction to the tariff announcement?
Well, it is hard to tell exactly what happened to those troops that were deployed in 2021. We also have to remember that there was a previous deployment of Mexican troops back in 2019. So this has happened before, you know, this is the third time in six years that we're seeing a major deployment of Mexican troops to the border at the behest of the United States.
So really, the question is right now, what are those troops realistically going to be able to do when we have those boots on the ground? Will they make a difference? Because it's not clear whether they made much of a difference before. Of course, the conditions right now on the US-Mexico border are really different. It's actually remarkably calm at the moment.
Illegal crossings across this border are at their lowest level since 2020. The border is very calm for a combination of reasons. Part of this are asylum restrictions that the Biden administration put in over the past year. And part of this has to do with the Mexican government's own actions, right? They have been breaking up migrant caravans long before they make it to the border with the U.S.
They've also been detaining migrants at levels rarely seen before in recent history in Mexico. So this has resulted in really a sharp decline in illegal crossings at that border.
And one other thing I want to say about this is if the goal is to address not only migration, but the flow of illegal drugs across the border, Mexico sending thousands of National Guard soldiers to the border is really going to do very little to attack that problem. Because while...
President Trump and other leaders in the Republican Party have argued that migrants are responsible for taking a lot of the fentanyl across the border into the United States. Actual U.S. government evidence and statistics show that that's not the case. U.S. citizens overwhelmingly are the ones who are smuggling fentanyl into the U.S.
So it's not like the fentanyl crisis is going to be solved in one month. It's not going away. It's not clear if the deployment of soldiers is going to do much about it either.
That's fascinating. So given that, Ana, how should we think about this? Is this Mexico capitulating to Trump or Trump capitulating to Mexico? Should we see this as a genuine victory for U.S. national security or mostly symbolic? Because the reporting that Simone is describing suggests there's not exactly a migrant crisis of the scale we're used to thinking of at that border.
Yeah, well, I think both sides are eager to try to turn this into a symbolic and political victory for themselves, kind of regardless of what the terms of it are. And so the issue with judging whether or not they've made real gains here is that, particularly for Trump, the requirements that he was asking for to satisfy him were kind of vague and subjective.
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Chapter 6: What deal was reached to avoid the tariffs?
Chapter 7: What impact do tariffs have on U.S. consumers?
Chapter 8: How are trade relationships being affected?
Why are we willing to lose between $100 billion and $200 billion a year? We don't need them. As a state, it's different. As a state, it's much different. And there are no tariffs. So I'd love to see that, but some people say that would be a long shot.
This is something that started off as a joke, and Canadian officials actually pointed out to me that he made this joke during his first presidency. But he has been really repeating it over and over again in the standoff with Canada.
Right, and can we just say what an astonishing thing that is? is that in between two phone calls with Prime Minister Trudeau, what he's basically saying from the Oval Office is the easiest way to avoid tariffs is to become a United States state. I mean, just kind of deeply unusual.
I think deeply unusual is one way to put it. Also aggravating tariffs. terrifying, upsetting to many Canadians who are seeing, you know, the country they thought was their best friend, closest ally. You know, as Trudeau said on Saturday night, we've spilled blood next to you in multiple wars over the decades. That's really, really hard.
And it also just highlighted something Canadians were already suspecting, that perhaps it wasn't really about the border. Perhaps President Trump had other things on his sights.
And then, of course, we actually get this second call between Trudeau and Trump. But just tell us what happens.
The call goes on for at least 45 minutes. And at the end of it, Justin Trudeau puts out a statement that says, we have a deal. We should say this was just moments ago. It was literally four minutes ago to the moment that we're recording. And he says, we also are getting a 30-day reprieve from these tariffs, like Mexico had announced earlier in the day.
And he lays out what the deal is, and it is a border deal. The Canadian prime minister says that we are going to push ahead with a plan to spend 1.3 billion Canadian dollars. That's just shy of a billion U.S. dollars. deploy more technology, more staff and personnel along that border.
Now, it is worth mentioning that this plan had already been put in place weeks ago in response to the original Trump concerns. So I think it'll be interesting to see whether it's sold as a victory when it was a plan already announced. However, on the fentanyl front... Trudeau does announce several new measures. He says Canada will appoint a fentanyl czar.
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