Trump tariffs on Mexico and Canada set for weekend implementation

Shreedhar Rathi | Feb 01, 2025, 09:19 IST
Trump tariffs on Mexico and Canada set for weekend implementation
( Image credit : ANI )
President Trump announced tariffs on Canada and Mexico will start on Saturday. Key trade sectors, including the auto industry, oil, spirits, and agriculture, will be affected. Experts warn of increased costs for consumers on cars, gasoline, and groceries. The potential for retaliatory tariffs could further impact American farmers and industries.
President Donald Trump announced this week that tariffs on Canada and Mexico will take effect on Saturday. These two nations, both geographically and economically close to the U.S., are key trade partners.

Trade between North American countries surpassed China in 2023, amounting to $1.8 trillion—significantly higher than the $643 billion in commerce conducted with China that same year. The following are some key goods that could be affected.

Auto Industry Faces Major Disruptions

The auto sector, deeply integrated across North American borders, could be severely impacted. According to S&P Global Mobility, over 20% of cars and light trucks sold in the U.S. are manufactured in Canada or Mexico.

In 2023, the U.S. imported $69 billion worth of vehicles from Mexico and $37 billion from Canada, along with $78 billion in auto parts from Mexico and $20 billion from Canada. Many American-made vehicles rely on parts that repeatedly cross borders before final assembly.

“You throw 25% tariffs into all that, and it’s just a grenade,” said trade expert Scott Lincicome.

S&P Global Mobility warns that automakers will likely pass these costs to consumers, estimating that the average U.S. car price could rise by around $3,000. With new car prices already averaging $50,000 and used cars at $26,000, this could add further strain on buyers.

Oil Prices Set to Rise

Canada is the largest foreign supplier of crude oil to the U.S., sending $90 billion worth from January to November last year. Mexico followed at $11 billion. Many American refineries process heavier crude oil from Canada, as U.S. domestic production mostly consists of lighter crude.

Trump has not yet decided whether to include Canadian and Mexican oil in the tariffs. However, experts warn that such a move could lead to higher gas prices, particularly in the Midwest. TD Economics predicts tariffs could increase gasoline prices by 30 to 70 cents per gallon.

Alcohol Industry Faces Higher Costs

Tariffs on imported spirits could also impact consumers. In 2023, the U.S. imported $4.6 billion in tequila and $108 million in mezcal from Mexico, along with $537 million in Canadian spirits, including $202.5 million worth of whisky.

The Distilled Spirits Council warns that such tariffs could trigger retaliatory actions, further hurting the industry. U.S. whiskey already faces a looming 50% tariff from the European Union set to take effect in March.

Chris Swonger, CEO of the council, emphasized the potential damage to the hospitality sector, which is still recovering from the pandemic. “Tariffs on spirits from our neighbors will hurt U.S. consumers and lead to job losses,” he stated.

Agriculture Feels the Heat

American consumers may also see higher grocery prices, particularly for fresh produce. In 2023, the U.S. imported $45 billion in agricultural products from Mexico, including 63% of imported vegetables and 47% of fruits and nuts. Imports from Canada totaled $40 billion. A 25% tariff could significantly drive up costs.

“Grocery stores operate on really tiny margins,” said Lincicome. “They can’t absorb the tariffs, especially when 90% of avocados come from Mexico. You’re talking about guacamole tariffs right before the Super Bowl.”

Potential Retaliation from Mexico and Canada

U.S. farmers are wary of retaliatory tariffs, recalling the first Trump administration when trade partners targeted agricultural exports. China and other nations imposed tariffs on American soybeans and corn, leading to significant revenue losses.

Although the Trump administration provided billions in aid to offset these losses, many farmers prefer trade over subsidies. “We would rather get our money from the market,” said Mark McHargue, president of the Nebraska Farm Bureau. “It doesn’t feel great to get a government check.”

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