President-elect Trump has announced plans to impose 25% tariffs on all imports from Mexico and Canada unless these countries take concrete steps to control the flow of fentanyl and illegal immigrants. The proposed tariffs would be in addition to a planned 10% tariff on imports from China, citing concerns over fentanyl.
While addressing U.S. concerns around fentanyl and immigration is crucial, the potential costs of implementing such tariffs could be significant. Mexico and Canada are among the United States’ largest trading partners, with $900 billion in imports worth in 2023. A 25% tariff would substantially impact these trade relationships, particularly given that approximately 50% of U.S.-Canada and -Mexico trade is driven by supply chains in sectors like autos, medical equipment, energy, and agriculture.
The proposed tariffs are also at odds with the United States-Mexico-Canada Agreement (USMCA), a trade agreement negotiated by the Trump administration. Ignoring USMCA commitments could hinder progress on other key challenges, while signaling to governments globally that cooperation is not guaranteed under an agreement with Trump.
Mexico has threatened retaliation if such tariffs are imposed, which would further exacerbate the economic impact. The U.S.-China trade dynamic will also be affected, as a tariff-first approach may limit cooperation on issues like export controls and industrial subsidies.
The effectiveness of this strategy in addressing fentanyl flows and immigration remains to be seen. However, it is clear that if implemented, these tariffs would pose significant costs to U.S. industry, potentially undermining the Trump administration’s ability to address broader geopolitical challenges posed by China.
Source: https://www.brookings.edu/articles/assessing-trumps-proposed-25-tariff-on-imports-from-mexico-and-canada