In a historic move, US President Donald Trump announced on Tuesday the implementation of 25% tariffs on imports from Canada and Mexico, set to take effect on March 4, 2025, after a one-month delay. This decision impacts a staggering $918.54 billion in imports, marking the largest volume affected in world trade history. Additionally, these tariffs will cover 27.9% of the total US imports worldwide, which amounted to nearly $3.3 trillion in 2024.
The introduction of these tariffs is poised to deal a severe blow to the export sectors of both Canada and Mexico. In 2024, the US accounted for 75% of Canada’s total exports and a whopping 80% of Mexico’s exports. This heavy reliance means that Canadian and Mexican economies will face significant challenges as a result of the new tariffs.
Moreover, the US economy itself is not shielded from the repercussions. The imposition of these tariffs is expected to trigger a rise in inflation, affecting both manufacturers and consumers across the country. In retaliation, Canada and Mexico have expressed their readiness to implement similar measures, which could further strain US exports to these neighboring countries, currently making up one-third of the US global market.
The foundation of the trade relationship between the US, Canada, and Mexico is the United States-Mexico-Canada Agreement (USMCA), a regional free trade agreement that has fostered a zero-tariff free trade environment. The abrupt introduction of a 25% tariff threatens to disrupt the established North American supply chain, creating uncertainty and potential economic turbulence in the region.
While the US is a leading producer and exporter of oil and gas, it also heavily relies on imports, with Canada being the primary supplier. In 2024, the US imported $176.47 billion worth of oil and gas, with Canada supplying 60% of this total at $106.25 billion. Although oil and gas imports are subject to a reduced tariff rate of 10%, the increase is still expected to lead to higher gas prices for US manufacturers and consumers. Additionally, this could prompt Canada to shift its market strategies, further impacting the US energy landscape.
Reference(s):
cgtn.com
