As early as Saturday, President Donald Trump intends to impose a 25% tariff on imports from Canada and Mexico, which could raise the cost of everything from pickup trucks and fuel to guacamole dip for Super Bowl parties.
Retaliation would also be encouraged by the tariffs. Ontario’s leader, Doug Ford, has already threatened to retaliate by removing American alcoholic beverages from Canadian shop shelves. Canada is the world’s second-largest market for American distilled spirits, after the 27-nation European Union.
The trade deal that Trump himself struck with America’s neighbors during his first term is in danger of collapsing due to his tariffs. Trump once said that his U.S.-Mexico-Canada pact was the most equitable, well-balanced, and advantageous trade pact he had ever signed into law. He said it was meant to make commerce in North America more predictable, which would encourage firms to invest.
However, nothing is ever truly decided when it comes to Trump, the self-described Tariff Man, and his obsession with imposing taxes on goods from other countries.
The deal that Trump personally negotiated and constantly boasts about would be essentially destroyed by tariffs at such levels and scope, according to Scott Lincicome, a trade analyst with the libertarian Cato Institute.
According to the president, the purpose of the 25% levies is to put pressure on America’s two neighbors to take further action to halt the entry of fentanyl and illegal immigration into the country.
These are the goods that Trump’s tariffs could make more expensive.
Prices for a variety of goods, such as food, petrol, apparel, consumer electronics, jewelry, cosmetics, new automobiles and homes, and goods produced by American companies using imported raw materials and machinery, are probably going to increase for American consumers.
Many analysts, including Michael Robinet of S&P Global Mobility, believe that the threat of tariffs is also intended to persuade Canada and Mexico to comply with US demands for modifications to the USMCA when it is renewed next year.
According to Robinet, executive director of automotive consultancy at S&P Global, he is skeptical that Trump will implement the 25% universal tariffs on imports from Canada and Mexico, which he describes as a “shock-to-the-system” strategy that would cause a tariff winter and freeze the North American economy. In order to demonstrate to Canada and Mexico how much worse things could get if he doesn’t get his way, Robinet suggested that Trump instead delay, phase in, or initially exempt certain industries from the penalties.
Trump exerted pressure on Canada and Mexico to sign the USMCA five years ago, in part to reduce the large trade deficit between the United States and its trading partners.
That hasn’t been the case.
From $106 billion in 2019 to $161 billion in 2023 (the most recent full year for which figures are available), the U.S. imbalance in trade with Mexico has grown. This is partially due to the fact that Mexico, which is embroiled in a trade dispute with the United States, has supplanted China as the supplier of a large number of items that the United States imports, including computer servers, laptops, furniture, textiles, and shoes.
Additionally, the goods trade deficit with Canada has grown dramatically, rising from $31 billion in 2019 to $72 billion in 2023. The gap is mostly a result of American energy imports from Canada.
Trump’s objectives for the USMCA have not been fulfilled. According to Lori Wallach, a longtime opponent of the United States’ free trade agreements and director of the Rethink Trade program at the American Economic Liberties Project, our trade deficit with Canada and Mexico is significantly worse than it was. Since the USMCA, many jobs have been offshored to Mexico.
The United States is anticipated to push for regulations that would do more to encourage factories to produce in the United States when the USMCA is up for renewal next year. Additionally, it might try to stop Chinese goods from being shipped to the US via Mexico in order to avoid the tariffs that President Joe Biden and President Trump put on Beijing.
Trump’s tariffs may have an impact on Oregon, a state that depends heavily on commerce.
One of Oregon’s most important industries, the clothing industry, may be impacted by the tariffs if the president-elect implements them. The numerous exports from Oregon may suffer if other nations retaliate.
Compared to China, the United States today conducts a lot more business with Canada and Mexico, both for imports and exports. Compared to $643 billion with China, U.S. commerce in products and services with Canada and Mexico totaled over $1.8 trillion in 2023. The majority of goods enter the region free of tariffs thanks to the USMCA and the regional trade agreement it replaced in 2020.
Corporate boardrooms are feeling the heat from the looming 25% tariffs. The tax and consulting firm PwC estimates that if Trump follows through on his threat, tariffs on Canadian imports would increase from $440 million to $107 billion annually and on Mexican imports to the United States from $1.3 billion to $132 billion annually.
Furthermore, nobody can predict whether Trump will actually act or how long the tariffs will remain in effect if he does. Senior counsel at Baker & McKenzie and trade attorney Chandri Navarro said, “It’s really thrown industry into this turmoil of anxiety.” Certainty is what industry likes. Five years from now, you will be making decisions about purchasing, supply chain management, and production.
Trump sees tariffs as a solution to the majority of the economy’s problems. He claims that they provide funds for corporate and income tax cuts, entice businesses to relocate their operations to the US, and provide valuable leverage in putting pressure on other nations to make trade and other concessions.
According to Trump administration officials, those who oppose possible tariffs should not consider them in isolation because their other initiatives, such as reducing taxes and loosening regulations, will boost the economy.
Businesses are rushing to be ready. To get around the tariffs, some people purchased products and delivered them to the US in advance. Others are figuring out how much of the expense they can charge their clients. Dave Evans, co-founder and CEO of Fictiv, a San Francisco-based business that assists customers in managing their supply chains for metals and plastics, stated that it will regrettably affect a large number of consumers. This was evident during his first tenure. Companies do not fully absorb a tariff.
Mexico and Canada are also preparing. Former Canadian Finance Minister Chrystia Freeland has urged for retribution if Trump proceeds with tariffs. Freeland represented Canada in the USMCA negotiations. Retaliating where it hurts is part of being clever, according to Freeland, who is vying to succeed Prime Minister Justin Trudeau. Our counterattack needs to be exact and harsh, and it needs to go after Florida orange growers, Wisconsin dairy farmers, Michigan dishwasher makers, and many more.
Mexico has been in communication with Trump’s staff even before he arrived to the White House, President Claudia Sheinbaum of Mexico stated on Friday. The contact has been ongoing and consistent, she underlined.
According to Sheinbaum, Trump has made it apparent that his two primary concerns are fentanyl and immigration. According to her, her staff is working with the U.S. government on both of those matters.
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Regarding trade, she advised us to view ourselves as partners rather than rivals. However, Mexico is ready and has been for months in case the United States implements tariffs, Sheinbaum stated.
Now, it is crucial that the Mexican people understand that we will always stand up for the respect of our sovereignty, the dignity of our people, and an equal conversation, as we have always stated, without subordination, Sheinbaum said.
— The Associated Press’s Paul Wiseman
Boak, Josh This report was aided by Christopher Sherman.
