Saying Goodbye to Mexico and Canada

February 3rd, 2025

Boyana Nikolova

Since the 1990s, Canada, Mexico, and the US have had a remarkably stable trade relationship. Agreements like NAFTA and its successor deal, the USMCA, have been emblems of that security while also serving to improve relations. However, a recent series of domestic tariffs targeting Mexico and Canada may jeopardize both it and the future of the trilateral alliance.

President Trump has confirmed that his administration would impose tariffs of up to 25% on Mexican and Canadian-produced goods. These tariffs have already been imposed or will be imposed in the following week. Incredibly, Trump has foreshadowed these taxes for months before he took office, but the idea of taxing the US’s closest trade partners was literally unbelievable for most people. Now that Trump has begun following through with his promises, the fear and surprise is setting in.

For most Mexican and Canadian producers, this new policy will be disastrous. 77% of Canadian exports go directly to US markets while Mexican goods are slightly more dependent with over 78% of them heading to the US. For industries like car manufacturing and agribusiness this will be especially impactful. Canadian and Mexican manufacturers will lose access to one of their foremost markets as shipping their goods becomes fatally expensive.

As a result, it’s not just Trump’s newly-dubbed enemies that will suffer from the blow of tariffs. The average US household will be paying an additional $1,200 annually to cover for the expected increases in prices. In just days, products like gas, groceries, homes, and cars will increase in cost due to the redistribution of where they are being imported from. Additionally, it’s not just because cheaper alternatives from Mexico and Canada will stop being available but also because of how US suppliers will take advantage of those conditions. Many domestic steelmakers have interpreted the tariffs as a greenlight to increase their own prices as they come to hold a greater concentration of the market and thus, have more pricing power.

More importantly, as relations between the US and its neighbors sour to the tariffs, there has emerged the risk of a wider economic conflict. A long-term trade war might not be far-fetched at all. The answer as to whether or not it happens is cooperation. Trump has demanded that Mexico and Canada both beef up their border security in exchange for easing or even pausing tariffs. For example, an ongoing deal between Mexican president Claudia Sheinbaum and Trump would involve thousands of troops securing the border with Mexico in return for Trump putting a hold on Mexican tariffs.

As Trump demands a more secure border in the name of drug smuggling and illegal immigration, however, he will continue eroding the trust of countries that were once the US’s closest trading partners. It is difficult to determine whether Mexico and Canada will keep acquiescing via tougher border control or if they’ll eventually resist through a trade war. Regardless of their decision, the US is in for a wild ride with president Trump as the driver.