President-elect Donald Trump, in posts on his Truth Social site, has threatened to impose new tariffs on goods imported from Canada, Mexico, and China. In the posts, he stated that the tariffs would be one of his first Executive Orders and would remain in place until the parties involved can achieve more cooperation on illegal cross-border migration and border security. These countries represent the United States’ three largest trading partners, so there are serious implications should the tariffs be enacted. Canada, Mexico, and the US make up the United States-Mexico-Canada Trade Agreement (USMCA), which replaced NAFTA in 2020 during President Trump’s first term.
The proposed tariffs for Canadian and Mexican goods would be set at 25%, while an additional 10% would be added to goods from China. Many goods from China already carry an additional 7.5% to 100% tariff under Section 301 actions dating back as far as 2018 and which were recently modified after a required four-year review by the US Trade Representative (USTR). The modifications, recommended by the USTR, resulted in additional tariffs on a number of products, including electric vehicles (100%), critical minerals, and other products. Time will tell if the threat of additional tariffs will be used in negotiations for better cooperation addressing border security concerns with Canada and Mexico and the fentanyl supply from China. Of note, then-President Trump threatened Mexico with additional tariffs in 2019 to achieve cooperation in stemming the flow of migrants at the Southern Border.
Should these tariffs become a reality, it is a certainty that the affected countries will impose retaliatory tariffs on US products. However, Trump’s second term is still more than a month away, and we can expect the parties to engage in talks seeking to avoid the imposition of the proposed tariffs. Regardless of the outcome of this issue, it is expected that trade policy and tariffs will be in the news for the next four years.
Best Regards,
Sam McClure, LCB
Director of Compliance & Customs Services