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US President Donald Trump signs an executive order in the Oval Office at the White House in Washington, DC. on February 25, 2025. /CFP
Editor's note: He Weiwen is a senior fellow at the Center for China and Globalization (CCG). The article reflects the author's opinions and not necessarily the views of CGTN.
US President Donald Trump confirmed Tuesday that 25 percent tariffs on imports from Canada and Mexico will take effect either on time, or March 4, 2025, after a delay of one month. The tariffs will cover $918.54 billion in imports, the largest import volume affected in world trade history. It will also affect 27.9 percent of total US imports worldwide which stood at almost $3.3 trillion in 2024.
The tariffs will first of all deal a fatal blow to the exports of both Canada and Mexico as the US accounted for 75 percent of total exports of Canada and 80 percent that of Mexico in 2024. Likewise, it will also deal a heavy blow to the US economy and trigger a rise in inflation. What is more, as both Canada and Mexico have announced readiness for similar acts of retaliation in such times, the US export to both countries, accounting for one third of US global market, will suffer badly as well.
Bound by a regional free trade agreement, known as USMCA, the three countries' supply chain has been built on a zero-tariff free trade base. The sudden unilateral 25 percent tariff will lead to a serious disruption of the North American supply chain.
The US is a world leading oil and gas producer and exporter. Yet, it also depends heavily on imports, with Canada as the predominant supplier. The US imported $176.47 billion oil and gas in 2024, with Canada accounting for $106.25 billion, or 60 percent of the total supply. That has been the reason why only a 10 percent tariff, not 25 percent applies to oil and gas imports. Even so, it will result in a gas price rise for US manufacturers and consumers, and also lead to a possible market shift by Canada.
Freshly canned beers move on an assembly line at The Can Van headquarters in Sacramento, California, February 19, 2025. /CFP
Automotives USMCA provides a huge automotives supply chain in North America, with Mexico as the leading producer and supplier, and the US and Canada being leading users. In 2024, Mexico manufactured 3.98 million automotive units, with 2.77 million units, or 69.6 percent exported to the US. However, a 25 percent auto tariff is applied to all US auto imports from the world, Mexico will not lose its competitiveness, only leading to US auto users have to pay more. If Canada and Mexico apply a 25 percent retaliation tariff, the US auto production and export sector will suffer a sharp fall. In 2024, 38 percent of total US auto exports went to Canada and Mexico. In that event, it looks almost certain that the North America automotive industry supply chain will start a partial shift to other markets.
In relation to the use of primary metals, including steel and aluminum, Canada and Mexico combined accounted for 32.3 percent of US imports in 2024. The 25 percent tariff will lift the manufacturing cost in US automotive, machinery, construction, defense, and consumer goods.
Like in the case of vehicle industry, the retaliation from Canada and Mexico will also deal a heavy blow to US exports at large. In 2024, Canada and Mexico served as the largest and second-largest markets for the US, accounting for 32.8 percent, or almost one third of total US exports. In other words, the US has a higher dependence on Canada and Mexico markets than supply from them. Beside automotive, the US also has a relatively high dependence on Canada and Mexico in advanced technology products (ATP). In 2024, US exported $92.9 billion ATP to Canada and Mexico, 20 percent of total exports, with Mexico ranking as the largest market and Canada the third. The retaliation from these two countries will also create immense trouble to the US as there is no easy way to find enough alternate markets, particularly in such close proximity, and with such established transport links.
The immediate prospects of the tariff aftermath will be a fall in US-Canada trade and US-Mexico trade, a rise in import cost and inflation in the US. If the tariffs keep unchanged, a gradual shift in markets is likely to happen. The US will encourage more home production, and Canada and Mexico will look for alternate markets. A gradual shift in industries of oil and gas, automotive, primary metals and consumer goods may also happen, from among North American countries to Europe and Asia, or South America. Summing it up, Canada and Mexico will suffer more in short term and the US will be the loser in medium to long term. Trump has lifted a silly rock intended for Canada and Mexico as a warning to others further afield, only to find that the stone will ultimately drop, and mostly likely on his own feet.