TACO will perform again! Trump suspends 50% tariffs on Canada and suspends tariff storm on $20 billion goods

The Zhitong Finance App learned that US President Donald Trump announced late Tuesday night local time that the new tariffs of up to 50%, which were originally scheduled to take effect on Canadian goods on Wednesday, will be suspended for three days, and said that the two countries have essentially reached an agreement.

The newly announced three-day suspension of the 50% tariff is characteristic of a typical “Trump TACO deal” — first creating a risk shock with extreme tariffs, then passing an agreement or delaying cooling before the deadline, but this does not mean that Trump has completely withdrawn, because the details of the agreement and automobile tariffs have not yet been finally implemented.

Trump tweeted on the “Real Social” platform that the suspension of additional tariffs “is based on the fact that Canada and the US have reached an agreement, and the relevant documents are currently only being finalized.” The Canadian government has yet to immediately comment or confirm the news.

50% tariff, press the pause button for three days! $20 billion worth of goods to avoid tariff storm

Trump also said in a social media post that the Keystone XL pipeline “may be revived from the grave.” The project was cancelled by then-US President Joe Biden in 2021 after years of opposition from Aboriginal groups and environmentalists. However, Trump did not provide specific details.

Trump had already spoken with Canadian Prime Minister Mark Carney on Tuesday afternoon before releasing the above news. This was the second time the two had a conversation this week; previously, the two sides had been in intense and opaque negotiations for several weeks.

Two industry sources familiar with the negotiations said earlier that the current US automobile tariffs have been one of the sticking points in recent rounds of trade negotiations between the two sides.

The new tariffs proposed by the US will cover imported goods worth about $20 billion, and will apply regardless of whether Canadian goods meet the preferential treatment conditions stipulated in the US-Mexico-Canada Agreement. Previously, the agreement exempted the vast majority of Canadian industries from earlier US tariff measures.

Approximately 20 billion US dollars indicates the total value of imported goods from Canada that were originally scheduled to be covered by the new 50% tariff imposed by the US from Wednesday. This is not the purchase amount or agreement amount of the US-Canada agreement; affected areas may include timber, wine, and dairy products.

Trade experts and industry officials in North America generally say that the new tariffs could cause large-scale unemployment and business shutdowns in vulnerable industries such as timber, wine, and dairy products. They also warned that the dispute could complicate the broader US-Mexico-Canada Agreement negotiations.

“Products worth billions of dollars each year have not been affected before, but are now at risk of major shocks,” said Candace Lane, CEO of the Canadian Chamber of Commerce. “The company has been walking a tightrope for over a year, delaying recruitment, investment, and expansion of business in Canada.” she said.

Canada's minister of trade with the US, Dominique LeBlanc, and chief trade negotiator Janis Charette have been participating in negotiations in Washington since last week.

On Monday, Canadian officials held nearly two hours of talks with US Trade Representative Jamieson Greer and Secretary of Commerce Howard Lutnick.

Greer has repeatedly listed Canada's countervailing tariffs against America's initial tariffs, the refusal of some provinces to sell US alcohol products, and Canada's dairy supply management system as issues of dissatisfaction with the US.

Two sources said that one of the main sticking points is the tariffs imposed by the US on Canadian cars. Sources said that the two sides discussed reducing the tariffs imposed by the US on Canadian cars from 25% to 15% in accordance with the “Section 232” and further lowering the tariffs according to the proportion of US production content contained in each car. The details of Trump's alleged agreement are still unclear.

Accounting for customs deductions

One of the main focuses of the dispute is how to calculate tariff deductions based on product ingredients — Trump's Washington side requested that only content produced in the US be calculated, while Canada advocates that all content produced in North America, including Canadian and Mexican parts, be included in the calculation, sources said.

Earlier on Tuesday, the US Department of Commerce issued new regulations for manufacturers exporting automobiles from Canada and Mexico, requiring the proportion of US production content currently included in their certified products to apply for tariff deductions, and reduce this complicated certification process from twice a year to once a year.

However, according to a notice issued by the Federal Register, automobile manufacturers must re-certify the proportion of US production content included in vehicles before September 30 in order to apply for tariff deductions during the new fiscal cycle starting December 1.

A Canadian government source said last week that if the new tariffs officially take effect, Canada will continue to reserve all coping options, including government support for affected domestic industries and the possibility of suspending bilateral trade negotiations; however, the source also expressed hope that the US will be willing to reach an agreement.

TACO arrived as scheduled

This time, Trump suddenly announced on social media that the 50% tariff was suspended for three days. It has the characteristics of a very typical “Trump-style TACO deal” — that is, first to create a risk shock with extreme tariffs, and then pass an agreement or delay to cool down before the deadline. However, this does not mean that Trump has completely withdrawn, because the details of the agreement and automobile tariffs have yet to be finally implemented.

Trump's “TACO” on the US-Canada trade agreement is beneficial to the global stock market in the short term. It can reduce end-of-trade risks and promote the repair of cyclical sectors such as automobiles, industry, and raw materials and Canadian asset valuation; however, in terms of investment, it should be viewed as a “temporary reduction in risk premiums” rather than a permanent end to the trade war. We still need to wait for official documents and tariff implementation rules before the market rises.

Wall Street's increasingly popular trading strategy — TACO (Trump Always Withdraws Out/ Trump Always Retreats): It was born in April 2025 when Trump launched an unprecedented “equal tariff” campaign against the world. At the time, traders were betting that either the US government would take back the tariff threat, or even if implemented, it would be far less strong than Trump's threat and not enough to significantly slow the expansion of the US economy.

The term TACO was coined by a “Financial Times” columnist to describe Trump's repeated swings on the tariff issue after his “Liberation Day” speech on April 2, 2025, but in the end, he chose to retreat, and the stock market would rebound drastically. When asked about “TACO” at a press conference, Trump was furious, calling the question “vicious.”

The “TACO” strategy has now been widely adopted by traders and is currently the most popular trading strategy. Whenever Trump issues a new and more aggressive tariff threat or throws out other major threats to cause the market to plummet, investors in the global equity market bet that he will eventually retreat or that the actual implementation of the policy will be greatly weakened compared to Trump's verbal threats, and then choose to go to the bottom at an appropriate time of downturn, and bet heavily that the stock market will rebound drastically in the short term.