Despite Trump’s Halt, Over Half of Canadian & Mexican Goods to Face Tariffs – Here’s How?

Even after U.S. President Donald Trump suspended some of the tariffs on Canada and Mexico, the majority of imports from both nations are still under duty. Although there are exemptions under the US-Mexico-Canada Agreement (USMCA), they are not for the majority of goods, and therefore, trade tensions and economic consequences continue.

Limited Exemptions Under USMCA

Trump’s tariff hiatus is not a full exemption from tariffs but rather an exemption for selected products. Those goods that are under the purview of the USMCA are exempt, and individual exemptions have been awarded to automobiles and auto parts imported from Canada and Mexico. The tariffs on Canadian potash that is utilized in fertilizers have also been reduced from 25% to 10%.

Even with these easing measures, most Canadian and Mexican goods remain subject to tariffs. According to a White House spokesperson quoted by Bloomberg, using last year’s statistics, “38 per cent of Canadian goods and 49 per cent of Mexican goods” are eligible for USMCA tariff-free status. That means 62% of Canadian imports and 51% of Mexican imports remain under U.S. tariffs.

Mexico Can Expect More Relief, but Canada Will Pay a Steeper Price

According to Bloomberg, 41% of products are in a gray zone, eligible for the ‘most-favored nation’ rate, which is less than regular tariffs. Although this provides potential reprieve for Mexico, Canada isn’t as flexible.

Economic Impact and Market Reaction

Uncertainty over Trump’s evolving tariff policies has created economic volatility. Tariffs increasing costs and constant policy changes have resulted in market losses. The S&P 500 fell 1.8% on Thursday, a 3.6% week-to-date decline—the sharpest in two years since the U.S. banking crisis.

Future Tariffs and Expired Exemptions

The existing USMCA exemptions are temporary and are due to expire on April 2. Also, another set of 25% tariffs on steel and aluminum is to become effective from March 12.

Canada will likely be hit the most since it is still the biggest exporter of steel and aluminum to the U.S. With 62% of Canadian exports still being subject to tariffs despite USMCA exemptions, the economic impact is likely to worsen.