U.S. President Donald Trump has temporarily suspended plans for steep tariffs on Canada and Mexico, agreeing to a 30-day pause in exchange for enhanced border security and crime enforcement measures. However, tariffs on Chinese imports remain on track, set to take effect within hours.

The decision, announced Monday, came after Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum pledged to increase efforts against illegal immigration and drug trafficking. As part of the agreement, Canada will deploy new technology and personnel along its U.S. border while enhancing cooperation on organized crime, fentanyl smuggling, and money laundering. Meanwhile, Mexico has committed to reinforcing its northern border with 10,000 National Guard troops.

In return, the U.S. has vowed to prevent the trafficking of high-powered weapons into Mexico, a key concern for Sheinbaum’s administration.

Trump stated on social media that ensuring the safety of Americans is his responsibility and expressed satisfaction with the initial outcome of the agreement.

The deal avoids, for now, a trade war that economists warned could disrupt supply chains and raise consumer prices. Industry leaders welcomed the move, with Canadian canola trade group head Chris Davison calling it positive news for both nations.

While Mexico and Canada secured temporary relief, Trump remains firm on imposing a 10% tariff on all Chinese imports, effective at 12:01 a.m. ET Tuesday. A White House spokesperson confirmed that Trump will not speak with Chinese President Xi Jinping until later in the week.

Trump has threatened to escalate tariffs further unless China curbs fentanyl exports to the U.S., stating that if China does not take action, the tariffs will increase significantly.

Beijing has dismissed the accusation, calling fentanyl an American issue and vowing to challenge the tariffs at the World Trade Organization while leaving room for negotiations.

The latest developments boosted the Canadian dollar, which had earlier fallen to a two-decade low, while U.S. stock index futures saw gains after a turbulent Wall Street session.

However, analysts warn that prolonged tariffs could push Canada and Mexico into recession and trigger stagflation—characterized by high inflation, stagnant growth, and rising unemployment—in the U.S. Experts noted that replacing affected imports would require the U.S. to more than double its manufacturing output, an unrealistic short-term goal.

Trump also hinted that the European Union could be his next trade target, though he did not specify a timeline. EU leaders, meeting in Brussels, warned that they would retaliate if the U.S. imposed tariffs but called for dialogue instead of confrontation.

The EU is the U.S.'s largest trade and investment partner, and Trump suggested that Britain, now outside the EU, might be spared any potential tariffs.

Despite acknowledging that tariffs may cause short-term economic pain, Trump insists they are necessary to curb illegal immigration, combat narcotics trafficking, and strengthen American industries.

As tensions with the U.S. rise, European Union leaders have agreed to increase defense spending to counter threats from Russia and other security challenges. European Council President Antonio Costa emphasized the need for a stronger and faster response, though funding details remain uncertain.

Following Russia’s 2022 invasion of Ukraine, European nations have already increased military budgets. However, Trump’s wavering commitment to NATO has fueled concerns about Europe’s reliance on the U.S. for security.

Last year, EU nations spent an average of 1.9% of GDP on defense, totaling approximately €326 billion ($334.5 billion). The European Commission estimates an additional €500 billion will be required over the next decade to fill critical gaps in air and missile defense, ammunition, and military transport.

Trump has urged NATO members to raise defense spending to 5% of GDP, a level currently unmatched by any country, including the U.S.

European leaders are exploring various financing options, including national budgets, private capital, and the European Investment Bank. However, the politically sensitive issue of issuing joint EU debt for military spending remains unresolved.

As global trade and security dynamics shift, Trump’s policies continue to reshape international relations, with potential economic and political consequences for years to come.