Trump slaps 25% tariff on imports from Canada, Mexico; additional 10% duty for Chinese goods

Sub: Eco

Sec: External sector

Context:

U.S. President Donald Trump announced new tariffs on key trading partners Canada, Mexico, and China.
The rationale behind the move was to address what Trump described as a “major threat” posed by illegal immigration and the flow of drugs, particularly fentanyl, into the U.S.
President Trump invoked the International Emergency Economic Powers Act to justify the imposition of tariffs, declaring illegal immigration and drug flows a national emergency.

Tariffs Imposed:

Effective immediately, Canadian and Mexican exports to the U.S. will face a 25% tariff. However, energy resources from Canada will be subjected to a lower tariff rate of 10%.
Goods from China, which already face various tariffs, will see an additional 10% tariff.
Additionally, Trump’s order suspends exemptions that previously allowed low-value imports from these three countries to enter the U.S. duty-free.
The tariffs will likely lead to increased prices for American consumers and is expected to slowdown US economy.

Impact on Supply Chains:

Automobile and Electronics: U.S. imports from Canada and Mexico were valued at nearly $900 billion in 2023. Analysts predict that industries like automobiles and electronics, which rely on integrated supply chains between the three North American countries, will be hit especially hard.
Agriculture: Canada and Mexico also account for a large portion of U.S. agricultural imports, meaning items like avocados and tomatoes could see higher prices due to the tariffs. Mexico is a key supplier of vegetables, fruit, and nuts to the U.S.

Impact on Canada and Mexico:

Canada and Mexico rely heavily on U.S. trade, with exports to the U.S. accounting for over 70% of Canada’s exports and 84% of Mexico’s.
Economists warn that the tariffs could trigger recessions in Canada and Mexico.
These tariffs may also conflict with the U.S.-Mexico-Canada Agreement (USMCA), a trade deal signed by Trump during his first term.

About USMCA:

The United States-Mexico-Canada Agreement (USMCA) is a trade agreement between the United States, Mexico, and Canada that replaced the North American Free Trade Agreement (NAFTA).
The USMCA entered into force on July 1, 2020.
USMCA is intended to last 16 years and will be reviewed every 6 years.

Key Features of USMCA: