TACO Returns! Trump Temporarily Delays 50% Tariffs on Canada; $20 Billion Worth of Goods Temporarily Spared from Tariff Storm

According to Zhitong Finance APP, U.S. President Donald Trump announced late Tuesday local time that the newly imposed tariffs of up to 50% on Canadian goods, originally set to take effect on Wednesday, will be suspended for three days, adding that the two countries have essentially reached an agreement.

This latest three-day suspension of the 50% tariffs is a classic example of a "Trump TACO trade"—first creating risk shocks with extreme tariffs, followed by a cooling-off period through an agreement or an extension just before the deadline. However, this does not mean Trump has made a complete concession, as the details of the agreement and auto tariffs have yet to be finalized.

Trump posted on "Truth Social" that the suspension of tariffs "is based on the fact that Canada and the United States have reached an agreement, pending only the finalization of related documents." The Canadian government has not yet commented or confirmed this news.

50% Tariff Put on a Three-Day Pause! $20 Billion Worth of Goods Temporarily Spared from Tariff Storm

Trump also stated in a social media post that the Keystone XL pipeline "could be resurrected from the grave." The project was canceled in 2021 by then-U.S. President Joe Biden after years of opposition from Indigenous groups and environmentalists. However, Trump did not provide specific details.

Before releasing this information, Trump had already spoken with Canadian Prime Minister Mark Carney on Tuesday afternoon—their second conversation this week; previously, both sides had engaged in several weeks of tense and opaque negotiations.

Two industry sources familiar with the negotiations said earlier that U.S. auto tariffs have consistently been one of the main sticking points in recent rounds of talks between the two sides.

The proposed new tariffs from the United States will cover about $20 billion worth of imported goods, applying regardless of whether Canadian goods qualify for preferential treatment under the United States-Mexico-Canada Agreement (USMCA). Previously, this agreement had shielded most Canadian industries from earlier U.S. tariff measures.

The $20 billion figure refers to the total value of Canadian imports set to be subject to the new U.S. 50% tariffs starting Wednesday, not the procurement or agreement value. Affected sectors may include lumber, wine, and dairy products.

Trade experts and industry officials in North America generally believe the new tariffs could lead to massive unemployment and business closures in vulnerable sectors such as lumber, wine, and dairy. They have also warned that this dispute could further complicate the broader USMCA negotiations.

"Billions of dollars’ worth of goods that were previously unaffected are now at risk of major disruption," said Candice Layne, CEO of the Canadian Chamber of Commerce. "Businesses have been walking a tightrope for over a year, delaying hiring, investment, and expansion in Canada," she said.

Dominic LeBlanc, Canada’s Minister responsible for U.S. trade, and chief trade negotiator Janice Charette have been in Washington for talks since last week.

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

Greer repeatedly cited Canada's retaliatory tariffs in response to the original U.S. tariffs, some provinces’ refusal to sell American alcoholic products, and Canada’s supply management system for dairy as points of contention for the U.S.

Two sources said one main sticking point is the U.S. tariffs on Canadian autos. The sources said the parties discussed lowering U.S. tariffs under Section 232 on Canadian vehicles from 25% to 15%, with further reductions based on the proportion of American-made content in each car. The specific details of the deal claimed by Trump remain unclear.

Tariff Deductions Calculation

One primary focus of the dispute is how to calculate tariff deductions based on product content—the Washington side under Trump demands counting only U.S.-produced content, while Canada advocates including all North American content, including Canadian and Mexican components, according to sources.

Earlier Tuesday, the U.S. Department of Commerce released new rules for manufacturers exporting autos from Canada and Mexico, requiring them to certify the proportion of U.S.-produced content in their products to qualify for tariff deductions, and reduced the complex certification process from twice a year to once a year.

However, a notice in the Federal Register stated that automakers must recertify the proportion of U.S. content in vehicles before September 30 in order to apply for tariff deductions in the new annual cycle beginning December 1.

A Canadian government source said last week that if the new tariffs are formally implemented, Canada will retain all response options, including providing government assistance to affected domestic industries and possibly suspending bilateral trade talks. However, the source also expressed hope that the U.S. would be willing to reach an agreement.

TACO as Expected

This sudden three-day suspension of imposing the 50% tariffs, announced by Trump on social media, is a highly characteristic "Trump-style TACO trade"—namely, risk shock via extreme tariffs, then cooling before the deadline by agreement or extension. However, this does not mean Trump is fully conceding, as details of the agreement and auto tariffs remain unfinalized.

Trump’s “TACO” approach to the U.S.-Canada trade deal is a short-term positive for global stock markets, reducing tail-end trade risks and boosting valuations for cyclical sectors such as autos, industrials, raw materials, and Canadian assets. However, for investors, this should be seen as “a temporary decline in risk premiums” rather than a permanent end to the trade war. The market should wait for the official documents and detailed tariff implementation rules before chasing the rally.

The increasingly popular Wall Street trading strategy—TACO (Trump Always Chickens Out): originated in April 2025 when Trump launched an unprecedented “reciprocal tariffs” campaign on the world stage. At the time, traders were betting that either the U.S. would walk back the tariff threats, or, even if implemented, the measures would not be as harsh as Trump threatened and would not significantly slow U.S. economic expansion.

The term TACO was coined by a Financial Times columnist to describe Trump’s flip-flopping on tariffs after his “Liberation Day” speech on April 2, 2025, but ultimately he would choose to back down and the stock market would rebound sharply. When asked about “TACO” at a press conference, Trump became angry and called the question “malicious.”

The “TACO” strategy has now been widely adopted by traders and is the hottest trading strategy at present. Whenever Trump issues a new, more aggressive tariff threat or another major threat that causes the markets to plunge, investors in global equity and bond markets bet that he will ultimately retreat or that the actual policy implemented will be much less severe than Trump’s rhetoric, thereby choosing to scoop up bargains during market downturns and betting on a short-term rebound in the stock market.