President Trump's threatened 25% tariffs on Mexico and Canada could dismantle the USMCA trade agreement he negotiated. While Trump claims the tariffs aim to curb undocumented immigration and fentanyl smuggling, experts suspect they're also a bargaining chip for USMCA renegotiations. Canadian Premier Doug Ford has vowed retaliatory actions, highlighting the potential economic fallout.
Trump ’s tariffs threaten to blow up the trade agreement he himself negotiated with America’s two neighbors in his first termThe tariffs would also invite retaliation. Doug Ford, the premier of Ontario, has already vowed to counterpunch by pulling American alcohol off store shelves in the Canadian province – no idle threat; Canada is the world’s No. 2 market for America’s distilled spirits .
“Tariffs at those levels and at that scope would effectively destroy the agreement that Trump himself negotiated and always brags about,’’ said Scott Lincicome, a trade analyst at the libertarian Cato Institute. Robinet, executive director of automotive consulting at S&P Global, said he doubts that Trump will go ahead with 25% across-the-board tariffs on Canadian and Mexican imports – what he calls a “shock-to-the-system’’ approach that would freeze the North American economy in a “Tariff Winter.’’ Instead, Robinet said, Trump might postpone or phase in the tariffs or initially exempt some industries to show Canada and Mexico how much worse things could get if he doesn’t get his way.
The trade gap in goods with Canada has ballooned, too: From $31 billion in 2019 to $72 billion in 2023. The deficit largely reflects America’s imports of Canadian energy. The United States now does far more business – exports and imports alike – with both Canada and Mexico than it does with China. In 2023, U.S. trade of both goods and services with Canada and Mexico came to more than $1.8 trillion, compared with $643 billion with China. Because of USMCA – and the regional trade deal it replaced in 2020 – most products cross the region’s borders tariff-free.
Trump views tariffs as a fix-it for most of what ails the economy. He says they raise money for cuts in income and corporate taxes, encourage companies to move production to the United States and offer useful leverage in pressuring other countries to make concessions on trade and other issues.
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