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Friday, February 7, 2025
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Trump tariffs would be ‘blow’ to US allies Canada and Mexico, experts say

President-elect Donald Trump’s promise to hit goods from Mexico and Canada with 25% tariffs when he returns to the White House on Monday could strain trade relations among the three nations, experts said during an online forum.

“We have to start from the premise that the application of 25% tariffs against all products from Canada and Mexico is a huge blow to the USMCA [United States-Mexico-Canada Agreement] and a huge blow to our confidence in the U.S. as an ally,” Steve Verheul, Canada’s chief trade negotiator from 2017-2021, said during the Thursday forum hosted by the Wilson Center in Washington.

The Wilson Center is a nonpartisan policy forum that examines global issues. The forum was titled “USMCA 2026 Review: New Realities and Strategic Shifts in North American Trade.”

Verheul, a principal at Toronto-based GT & Co. Executive Advisors, was Canada’s chief negotiator for the USMCA trade pact, which went into effect in July 2020.

“This is a very aggressive action, and we are going to have to respond, from Canada’s perspective. Probably our most effective levers are going to be in the resource sector, whether it’s critical minerals, whether it’s oil and gas,” Verheul said. “But the way it looks to us is that the U.S. is going to put much stronger barriers against Canada in the U.S. market than they are to China and Venezuela and others. Does the U.S. really want to start buying these essential resources from those countries, as compared to Canada? Who has been a loyal ally to the U.S. throughout all of this, and from Canada’s perspective, we’re far better to go down the track of trying to strengthen North America as a region.”

Along with Verheul, panelists included Earl Athony Wayne, a former U.S. ambassador to Afghanistan, Argentina and Mexico and public policy fellow at the Wilson Center; Juan Carlos Baker, CEO of Ansley International Consultants and Mexico’s former vice minister for foreign trade; and Shauna Hemingway, former Canadian ambassador to the Dominican Republic and deputy head of mission in Mexico City.

Several of the panelists said Trump will immediately make good on his promises to levy the 25% tariffs.

“I believe the most likely scenario is that Donald Trump will do what he did back in 2018 when the Section 232 tariffs started on steel and aluminum – that is to say, sign an executive order saying that tariffs are coming, but for the time being, given that the U.S. is engaged in conversations with Mexico and Canada, those tariffs will be suspended, provided that Mexico or Canada will come successfully out of a negotiation with him,” Baker said. “I think that he will have the stick, but he might not strike immediately, for all intents and purposes.”

Mexico and Canada are the top two U.S. trade partners.

From January through November, U.S.-Mexico trade totaled $776.05 billion, a 6% year-over-year increase compared to the same period last year, according to the latest Census Bureau data.

Trade between Canada and the U.S. totaled $699 billion for the first 11 months of 2024, a 2% year-over-year decrease compared to the same period in 2023.

Mexico ($766 billion) and Canada ($699 billion) are the top two U.S. trade partners year-to-date in 2024. (Photo: Jim Allen/FreightWaves)

Related: US-Mexico trade up in November as Trump’s tariffs loom

Wayne said Trump will most likely address illegal migrants and drugs flowing across both borders before any trade talks can take place.

“I think we’re going to have to be ready for reactions against the two neighboring countries based not on the trade agreement. Before we get to the trade agreement, Trump is going to want to act based on what Mexico is doing vis-a-vis people intending to migrate illegally to the United States,” Wayne said. “Trump is also going to look at what Mexico and Canada are going to do on criminal activities and criminal groups trying to send illegal drugs into the United States. That’s going to be sort of a preliminary block. I think that’s going to stop us actually getting directly to a number of the trade issues.”

Hemingway said the three nations need to come up with a plan to benefit all of North America.

“We talk about these trade agreements and in the North America context that we’re looking for a win-win-win situation, as if that’s a lofty dream and a lofty ambition, but it’s actually essential to all three countries,” Hemingway said. “The win-win-win has to be there. There’s no way to achieve an agreement without that being part of it. It has to be a win-win-win. We should stop sort of talking about it as if that’s an unattainable dream, and recognize that it is the goal and the solution that we’re looking for.”

Trump said Tuesday he will create a new government body to collect tariffs and other revenues from foreign nations.

“Through soft and pathetically weak Trade agreements, the American Economy has delivered growth and prosperity to the World, while taxing ourselves. It is time for that to change. I am today announcing that I will create the EXTERNAL REVENUE SERVICE to collect our Tariffs, Duties, and all Revenue that come from Foreign sources. We will begin charging those that make money off of us with Trade, and they will start paying, FINALLY, their fair share,” Trump said on his social media site, Truth Social.

Baker, Wayne and moderator Diego Marroquin, the inaugural Bersin-Foster North America Scholar at the Wilson Center, recently co-authored a report titled, “A Practical Guide to the USMCA 2026 Review: 3 Principles, 5 Rules for Success.” The guide’s aim is to help trade stakeholders build on the USMCA’s achievements and lay the groundwork for a stronger North American partnership.

“Tariffs are not only inflationary, they’ll make goods more expensive for us consumers, as well as for Canadian and Mexican families,” Marroquin said. “Tariffs are also anticompetitive. They will make our industries less competitive vis-a-vis China, vis-a-vis Russia and even Venezuela.”

The post Trump tariffs would be ‘blow’ to US allies Canada and Mexico, experts say appeared first on FreightWaves.

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