- On Wednesday, President Donald Trump declared extensive tariffs on products imported from various countries worldwide.
- Canada and Mexico were exempted from the most recent tariff measures.
- However, the two adjacent countries continue to be subjected to the previous 25% tariffs.
President Donald Trump's most recent set of tariffs included two notable absences: Mexico and Canada.
Numerous nations, such as China, faced significant repercussions. reciprocal tariffs On Wednesday. Following Trump's statement, CNBC indicated that Chinese products might face a combined tariff of up to 54%, which includes both the newly proposed 34% tariff as well as those already declared. Meanwhile, goods from the European Union would encounter an additional 20% duty.
As stated by the White House, this does not exempt the U.S.'s neighboring countries from all consequences. The current 25% duties on most products coming from Mexico and Canada will stay in place.
The USMCA along with Trump's former tariffs
Under the former president's previous directive, a 25% tax was imposed on everything. Mexican and Canadian goods that do not comply with the United States-Mexico-Canada Agreement.
The White House asserts that these tariffs are essential due to insufficient efforts by both nations in preventing illegal immigration and curbing the flow of fentanyl entering the U.S. across both northern and southern borders. However, leaders from each country contest this assertion.
The United States-Mexico-Canada Agreement (USMCA), which took over from the North American Free Trade Agreement in 2020, continues the practice of imposing zero tariffs on the majority of agricultural items, textiles, clothing, and various goods as long as they comply with the new pact’s regulations regarding the origins of these goods.
Inconsistent energy supplies and potash originating from neighboring countries continue to be subjected to a 10% tax; this measure was seen as the administration giving in to demands from agricultural businesses concerned about a vital component of fertilizers.
Chris Tang, a UCLA professor specializing in global supply chain management and the effects of regulatory policies, told Business Insider that the Trump administration’s decision to exclude Canada and Mexico from the new tariff list could indicate that the president acknowledged these countries’ importance to the U.S. economy. However, this move was likely also part of a strategic negotiation technique.
For instance, at present, goods that meet USMCA requirements remain exempt from tariffs," explained Tang. "However, this exemption is not permanent. Trump mentioned, ‘That could change.’ This statement leaves him some flexibility to renegotiate terms.
A representative from the White House informed Business Insider that should Trump's previous directive be revoked, every item not compliant with USMCA standards would face a reduction to a 12 percent tariff.
Margaret Kidd, an instructional associate professor of supply chain and logistics technology at the University of Houston, told BI, "It's not in our best interest for the United States to alienate our two closest trading partners."
She mentioned that in 2024, trade between Mexico and the U.S. amounted to approximately $945 billion, with much of this merchandise passing through Texas. She pointed out that tariffs imposed on the southern nation disproportionately impact border states, as these regions heavily depend on their economies, which revolve around cross-border commerce.
"It's all intermingled," Kidd said.
Tang expressed hope that excluding Canada and Mexico from the tariffs imposed on Wednesday might serve as an olive branch to ease growing trade tensions with these nations since President Trump assumed office.
“Indeed, our economies are interconnected,” Tang stated. “Therefore, I sincerely hope they manage to come together and resolve their issues since these nations are our allies and neighbors—this matter holds great significance. Thus, I am hopeful that there’s a chance for those three countries to collaborate.”
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