The President of the United States, Donald Trump, has fulfilled his promise to impose 25% tariffs on all exports from Mexico and Canada. This decision includes a retaliation clause, which allows for tariffs to be increased if the affected countries respond. As a result, the two main commercial partners of the United States will be punished with high rates on the sale of their products. This measure is a direct consequence of three grievances that Trump blames Mexico and Canada for: not stopping the flow of irregular migrants, not preventing the arrival of fentanyl, and the disproportionate commercial deficit that the US has with its neighbors.
The commercial deficit between the United States and its neighbors is significant. The US deficit with Mexico increased from $106 billion in 2019 to $161 billion in 2023, while the deficit with Canada rose from $31 billion in 2019 to over $72 billion in 2023. Trump’s solution is to impose tariffs, which he believes will be successful. However, the interconnectedness of the three economies after over 30 years of free trade suggests that the application of tariffs will have far-reaching consequences.
Despite efforts by the President of Mexico, Claudia Sheinbaum, and the Prime Minister of Canada, Justin Trudeau, to deter Trump from imposing tariffs, the measure is set to come into force. Both leaders have tried to appease Trump, with Trudeau meeting him in person and Sheinbaum speaking with him several times by phone. Additionally, Chinese commercial networks have been dismantled in Mexico, and there have been significant seizures of fentanyl. However, these efforts have not been enough to prevent the imposition of tariffs.
The concern about the catastrophic consequences of these tariffs is widespread, both within and outside the United States. The President of the Association Circle of Exporters, Lucy Ponce, believes that the measure will have a negative impact and that the imposition of tariffs will encourage Mexico and other countries to take retaliatory measures. The tariffs will focus on the automotive sector and oil, which will affect the entire supply chain.
Mexico is heavily dependent on the United States, with over 80% of its exports going to the US. The country is also the main car exporter and spare parts supplier to the US, and the application of tariffs could affect 12 million American families. Furthermore, many personal computers, refrigerators, and agricultural products bought in the US come from Mexico. The Mexican government has insisted on maintaining a dialogue with the US and has a plan in place to protect the country’s economy from the impact of the tariffs.
In Canada, the response has been more forceful, with Trudeau stating that the country will respond in a “determined and energetic” way. Canada will also impose retaliatory measures, as 75% of its exports go to the US, primarily in the energy sector. Despite the messages of tranquility from leaders on both sides of the border, the confusion surrounding the details of the tariffs and their impact predicts a complicated commercial scenario. The entry into force of the tariffs is expected to have significant consequences, and both countries are preparing for a potentially difficult period ahead.