Limited Tariff Exemptions: Why Most Canadian and Mexican Exports Still Pay the Price?
- International Affairs North America
Shreya Naskar- 0
- 3 minutes read
Despite a temporary pause on tariffs imposed by U.S. President Donald Trump on Canada and Mexico, a significant portion of imports from these two neighbouring countries continues to be taxed. While the U.S.-Mexico-Canada Agreement (USMCA) exempts certain goods, a large percentage of Canadian and Mexican exports still face tariffs. This ongoing trade policy has significant economic consequences for businesses, consumers, and financial markets. Trump’s administration implemented a brief suspension of certain tariffs, primarily focusing on goods covered under USMCA. However, this pause did not eliminate tariffs. The key relaxations include:
- Automobiles and spare parts from Mexico and Canada are temporarily exempted from tariffs.
- Reduction in tariffs on Canadian potash (a key ingredient in fertilizers) from 25% to 10%.
Despite these measures, most Canadian and Mexican imports remain subject to tariffs, impacting trade flows and increasing costs for industries dependent on these goods.
According to Bloomberg, a White House official reported that:
38% of Canadian goods and 49% of Mexican goods benefit from USMCA’s tariff exemptions. This leaves 62% of Canadian and 51% of Mexican imports still subject to tariffs. For Mexico, there is room for additional exemptions, but Canada remains more vulnerable due to the high percentage of its goods still facing tariffs.
Potential Future Developments
Extended or Permanent Exemptions: There is potential for further tariff relaxations, particularly for Mexico. However, Canada is less likely to see additional exemptions. USMCA Policy Adjustments: If trade disputes persist, revisions to USMCA regulations might be considered to create a more predictable framework for North American trade. Political and Economic Pressure: The U.S. government may face pressure from industries and trade partners to rethink tariff policies that disrupt supply chains and increase consumer prices.
While Trump’s temporary tariff pause offers some relief, it does not address the broader issue of ongoing trade restrictions on Canadian and Mexican imports. Canada, in particular, remains the most affected, as a majority of its goods continue to be taxed, especially in crucial industries such as metals and agriculture. As April 2 approaches, the expiration of certain exemptions under USMCA could further complicate North American trade dynamics, potentially leading to renewed negotiations or economic consequences for all parties involved. In the meantime, businesses and policymakers must navigate an uncertain trade landscape, balancing economic interests with political realities.
