Tariff News: Measures Targeting Mexico, Canada Go Into Effect

The implementation of Trump’s promised 25% tariffs on Mexico and Canada has taken effect. In addition, an extra 10% tariff has been imposed on Chinese goods, bringing the total additional tariff to 20%.

Trump has consistently stated that the tariffs are punitive, aiming to reduce drug trafficking into the United States. He has also asserted that they are intended to encourage companies to relocate more manufacturing operations back to the U.S. Following the official commencement of the tariffs, Trump shared on Truth Social, “If companies move to the United States, there are no tariffs!!!”

Mexico, Canada, and China are the top three trading partners of the U.S. Both Mexico and Canada rely more on the U.S. than vice versa, indicating that the economic repercussions could be greater for those two countries than for the U.S. On the other hand, China holds the largest share of global trading.

On January 31, Trump initially announced new tariffs, including a 10% tariff on China and a 25% tariff on all imports from Mexico and Canada to the U.S., with the exception of a 10% tariff on Canadian oil. On February 3, leaders from Canada and Mexico negotiated a one-month delay in the tariffs by pledging to enhance border patrol efforts.

However, on February 4, the initial 10% tariff on China still came into effect. In response, China retaliated with tariffs ranging from 10% to 15% on specific energy products, cars, and agricultural machinery, effective from February 10.

Subsequently, on February 7, Trump halted tariffs on small packages from China. Prior to this announcement, the United States Postal Service (USPS) briefly ceased accepting any packages from China in order to comply with the sweeping 10% tariff. All packages from China under $800 will now be imported into the U.S. duty-free.

On February 1, Canada announced retaliatory tariffs. However, following a discussion with Trump a few days later, Canadian President Justin Trudeau revealed that Canada’s tariff on the U.S. would also be postponed by a month.

Canada has already imposed retaliatory 25% tariffs on C$155 billion ($107 billion) worth of U.S. products. Tariffs on C$30 billion of American goods commenced on Tuesday, with the remaining tariffs on an additional C$125 billion set to begin in 21 days.

Mexican President Claudia Sheinbaum announced that Mexico will reveal its own retaliatory tariffs on March 9.

China responded with tariffs on agricultural imports from the U.S., including 15% tariffs on chicken, wheat, corn, and cotton imports. Additionally, there will be 10% tariffs on sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables, and dairy products, which will take effect on March 10.

The imposition of retaliatory tariffs could raise prices on goods imported from the U.S. and potentially lead to a trade war.

Estimations by the Peterson Institute for International Economics (PIIE) indicate that 25% tariffs on Mexico and Canada could dampen growth and hasten inflation. Consumers in the U.S. would experience price hikes on goods originating from those countries. They would also encounter higher prices for products manufactured in the U.S. that rely on supplies from those nations.

The Observatory of Economic Complexity (OEC), which provides global trade data, reveals that Mexico’s chief exports to the U.S. include computers, cars, as well as motor vehicles, parts, and accessories. The U.S. predominantly exports refined petroleum, motor vehicle parts and accessories, as well as petroleum gas to Mexico.

Canada primarily exports crude petroleum, cars, and petroleum gas to the U.S. Meanwhile, the U.S. mainly exports cars, refined petroleum, and delivery trucks to Canada.

China exports a wide range of products and supplies to the U.S., including telephones, computers, electric batteries, light fixtures, and motor vehicle parts and accessories. The U.S. primarily exports soybeans, cars, petroleum gas, integrated circuits, and crude petroleum to China.

Trump has outlined three additional tariffs that will be imposed on all nations, including a 25% tariff on aluminum and steel (March 12) and an unspecified tariff on all foreign cars (April 2).

On March 4, Trump hinted at a new agricultural tariff. He posted on Truth Social, “To the Great Farmers of the United States: Get ready to start producing a lot of agricultural products to be sold WITHIN the United States. Tariffs will be imposed on external products on April 2nd. Enjoy!” Trump did not specify which agricultural products might be affected.