How Unreasonable Tariffs Could Disrupt the North American Supply Chain
US President Donald Trump announced on Tuesday that the implementation of 25 percent tariffs on imports from Canada and Mexico will proceed as scheduled, with a new effective date of March 4, 2025, following a one-month delay. These tariffs will impact $918.54 billion worth of imports, marking the largest volume ever affected in global trade history. Additionally, they will represent 27.9 percent of total US imports, which reached nearly $3.3 trillion in 2024.
TroibNews 
**Editor's note:** He Weiwen is a senior fellow at the Center for China and Globalization. The article reflects the author's opinions and not necessarily the views of CN.
U.S. President Donald Trump confirmed on Tuesday that 25 percent tariffs on imports from Canada and Mexico are set to take effect either on schedule or by March 4, 2025, following a one-month delay. These tariffs will impact $918.54 billion worth of imports, marking the largest volume of trade affected in global history. They will also encompass 27.9 percent of total U.S. imports, which reached almost $3.3 trillion in 2024.
The tariffs are expected to severely impact the exports of both Canada and Mexico, given that the U.S. accounted for 75 percent of Canada’s total exports and 80 percent of Mexico’s in 2024. Additionally, the U.S. economy will face significant repercussions, including rising inflation. Furthermore, both Canada and Mexico have expressed readiness to retaliate, which would adversely affect U.S. exports to these countries—accounting for one-third of the U.S. global market.
Under the regional free trade agreement known as USMCA, the supply chain among the three nations is built on a zero-tariff trade foundation. The sudden imposition of a 25 percent tariff will disrupt the North American supply chain markedly.
While the U.S. is a leading producer and exporter of oil and gas, it relies heavily on imports, with Canada serving as the primary supplier. In 2024, the U.S. imported $176.47 billion in oil and gas, of which Canada contributed $106.25 billion, or 60 percent. This is why a 10 percent tariff, rather than the 25 percent, applies to oil and gas imports. Nevertheless, this will still lead to higher gas prices for manufacturers and consumers in the U.S. and could prompt market shifts from Canada.
The U.S. also benefits from a robust automotive supply chain established by the USMCA, with Mexico being the leading producer and supplier, while the U.S. and Canada are the primary consumers. In 2024, Mexico produced 3.98 million automotive units, exporting 2.77 million, or 69.6 percent, to the U.S. However, if a 25 percent tariff is levied on all U.S. auto imports globally, Mexico will not lose its competitiveness, but U.S. auto consumers will face higher prices. If Canada and Mexico impose a 25 percent retaliatory tariff, the U.S. auto production and export sector could experience a significant downturn, as 38 percent of total U.S. auto exports were sent to these countries. In this scenario, a partial shift of the North American automotive supply chain to other markets appears likely.
Regarding primary metals, including steel and aluminum, Canada and Mexico together represented 32.3 percent of U.S. imports in 2024. The introduction of the 25 percent tariff will increase manufacturing costs for U.S. automotive, machinery, construction, defense, and consumer goods.
Similar to the automotive sector, retaliatory actions from Canada and Mexico will also significantly impact U.S. exports overall. In 2024, Canada and Mexico were the largest and second-largest markets for the U.S., comprising 32.8 percent, or nearly one-third, of total U.S. exports. Thus, the U.S. is more reliant on these markets than on their supply. Additionally, the U.S. has considerable dependence on Canada and Mexico for advanced technology products. In 2024, the U.S. exported $92.9 billion of these products to Canada and Mexico, representing 20 percent of total exports, with Mexico being the largest market and Canada the third. Retaliatory measures from these countries will complicate U.S. trade, with few alternatives readily available, particularly given existing transport connections.
The immediate effects of the tariffs will likely result in decreased trade between the U.S. and Canada as well as between the U.S. and Mexico, alongside rising import costs and inflation within the U.S. Should the tariffs remain unchanged, a gradual market shift is expected, with the U.S. incentivizing domestic production and Canada and Mexico seeking alternative markets. This shift may affect industries including oil and gas, automotive, primary metals, and consumer goods, redirecting trade from North America to Europe, Asia, or South America. In summary, while Canada and Mexico may face short-term challenges, the U.S. could be the bigger loser in the medium to long term. Trump may have intended the tariffs as a warning to Canada and Mexico, but it seems likely that the repercussions will ultimately backfire on his own administration.
Thomas Evans for TROIB News
U.S. President Donald Trump confirmed on Tuesday that 25 percent tariffs on imports from Canada and Mexico are set to take effect either on schedule or by March 4, 2025, following a one-month delay. These tariffs will impact $918.54 billion worth of imports, marking the largest volume of trade affected in global history. They will also encompass 27.9 percent of total U.S. imports, which reached almost $3.3 trillion in 2024.
The tariffs are expected to severely impact the exports of both Canada and Mexico, given that the U.S. accounted for 75 percent of Canada’s total exports and 80 percent of Mexico’s in 2024. Additionally, the U.S. economy will face significant repercussions, including rising inflation. Furthermore, both Canada and Mexico have expressed readiness to retaliate, which would adversely affect U.S. exports to these countries—accounting for one-third of the U.S. global market.
Under the regional free trade agreement known as USMCA, the supply chain among the three nations is built on a zero-tariff trade foundation. The sudden imposition of a 25 percent tariff will disrupt the North American supply chain markedly.
While the U.S. is a leading producer and exporter of oil and gas, it relies heavily on imports, with Canada serving as the primary supplier. In 2024, the U.S. imported $176.47 billion in oil and gas, of which Canada contributed $106.25 billion, or 60 percent. This is why a 10 percent tariff, rather than the 25 percent, applies to oil and gas imports. Nevertheless, this will still lead to higher gas prices for manufacturers and consumers in the U.S. and could prompt market shifts from Canada.
The U.S. also benefits from a robust automotive supply chain established by the USMCA, with Mexico being the leading producer and supplier, while the U.S. and Canada are the primary consumers. In 2024, Mexico produced 3.98 million automotive units, exporting 2.77 million, or 69.6 percent, to the U.S. However, if a 25 percent tariff is levied on all U.S. auto imports globally, Mexico will not lose its competitiveness, but U.S. auto consumers will face higher prices. If Canada and Mexico impose a 25 percent retaliatory tariff, the U.S. auto production and export sector could experience a significant downturn, as 38 percent of total U.S. auto exports were sent to these countries. In this scenario, a partial shift of the North American automotive supply chain to other markets appears likely.
Regarding primary metals, including steel and aluminum, Canada and Mexico together represented 32.3 percent of U.S. imports in 2024. The introduction of the 25 percent tariff will increase manufacturing costs for U.S. automotive, machinery, construction, defense, and consumer goods.
Similar to the automotive sector, retaliatory actions from Canada and Mexico will also significantly impact U.S. exports overall. In 2024, Canada and Mexico were the largest and second-largest markets for the U.S., comprising 32.8 percent, or nearly one-third, of total U.S. exports. Thus, the U.S. is more reliant on these markets than on their supply. Additionally, the U.S. has considerable dependence on Canada and Mexico for advanced technology products. In 2024, the U.S. exported $92.9 billion of these products to Canada and Mexico, representing 20 percent of total exports, with Mexico being the largest market and Canada the third. Retaliatory measures from these countries will complicate U.S. trade, with few alternatives readily available, particularly given existing transport connections.
The immediate effects of the tariffs will likely result in decreased trade between the U.S. and Canada as well as between the U.S. and Mexico, alongside rising import costs and inflation within the U.S. Should the tariffs remain unchanged, a gradual market shift is expected, with the U.S. incentivizing domestic production and Canada and Mexico seeking alternative markets. This shift may affect industries including oil and gas, automotive, primary metals, and consumer goods, redirecting trade from North America to Europe, Asia, or South America. In summary, while Canada and Mexico may face short-term challenges, the U.S. could be the bigger loser in the medium to long term. Trump may have intended the tariffs as a warning to Canada and Mexico, but it seems likely that the repercussions will ultimately backfire on his own administration.
Thomas Evans for TROIB News
