Experts say President-elect Donald Trump’s vow to put 25% tariffs on Mexico and Canada violates the trade agreement he negotiated during his first term. The U.S.-Mexico-Canada Agreement, or USMCA for short, fulfilled Trump’s 2015 campaign promise to terminate and replace NAFTA, America’s longstanding free-trade agreement with its neighbors.
Trump announced in a Truth Social post that on his first day as president, he’ll sign an executive order charging Mexico and Canada a 25% tariff on all products coming into the United States.
“This tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!” he posted.
“It is a violation of the USMCA. The U.S. just basically said, ‘Oops, we are going to impose these tariffs no matter what our treaty says,” said Mary Lovely, a senior fellow at the Peterson Institute for International Economics specializing in U.S. trade flows and U.S.-China trade.
Lovely said Trump could try to unilaterally impose these proposed tariffs using the Emergency Powers Act.
“This would be a very unusual and certainly provocative application of that Emergency Powers Act,” she told Straight Arrow News. “Surely, it will go to the courts, but that seems to be the only route that he could do it given U.S. trade law in general and in particular, the promises we made under USMCA.”
Trump has no problem busting up trade agreements. It was a cornerstone of his candidacy that led to his first term, just as tariffs are for his second.
“It’s a disaster,” Trump said of NAFTA on “60 Minutes” in 2015. “We will renegotiate it or we will break it, because every agreement has an end.”
Is this the end of USMCA? Some are speculating that there is more behind Trump’s day-one tariff threat than meets the eye.
This constant threatening has a cost. It’s not a freebie.
Mary Lovely, Peterson Institute for International Economics
Trump supporter and hedge fund manager Bill Ackman cast doubt in an X post that Trump would even implement the threatened tariffs.
“@realdonaldtrump is going to use tariffs as a weapon to achieve economic and political outcomes which are in the best interest of America, fulfilling his America first policy,” Ackman posted.
“Trump sees an opening to push China further out of America’s backyard,” international relations expert Andrew Law wrote in his publication, The Mexico Brief. “This is less a policy declaration than a move to stir up more trouble amongst bickering allies. The goal? To extract even more concessions from Mexico and Canada on China. He’s throwing a cat amongst the pigeons to watch what happens. It’ll probably work.”
“It is a threat, obviously, and threats do get people to do things sometimes,” Lovely said. “The problem is that every time he threatens a trading partner, particularly free-trade-agreement partners, the rest of the world loses trust in the U.S. as a partner.
“Supply chains start to go around the U.S. rather than through the U.S., and that makes it more difficult for the companies in the U.S. that export,” she continued. “It also makes it more difficult for global companies that are trying to arrange supply chains to serve the United States. So this constant threatening has a cost. It’s not a freebie.”
In conjunction with tariffs on America’s neighbors, Trump also announced an additional 10% tariff on China related to the fentanyl crisis.
If the 25% tariffs on Mexico and Canada do go through, the question is, what will be impacted the most?
“Autos has to be number one,” Lovely said. “The U.S. auto industry is fully integrated with the industries in Mexico and Canada, so much that we don’t think about it as three industries; it’s one integrated platform. Some vehicles are said to go back and cross the border more than seven times before they hit car lots.”
On news of the threat, Detroit’s Big Three automakers traded down on Tuesday morning, Nov. 26. Ford started the day trading down 3%, GM went as far as 8% down, and Chrysler-owner Stellantis went down about 5%.
Food could also be set for a huge sticker shock. The guacamole is always extra, but the U.S. Department of Agriculture says Mexico provides about 90% of the avocados eaten in the U.S. More than half of all U.S. fresh fruit imports come from Mexico. On the northern border, oil is the top import from Canada.
The U.S. is the largest importer of goods in the world, with China, Mexico and Canada as its top suppliers, according to the U.S. Trade Representative. The U.S. is also the second-largest goods exporter after China. The top three recipients of U.S. exports are Canada, Mexico and China.
While the USMCA is not set to expire until 2036, there is a six-year review coming up in 2026. And China has more to do with North American trade than the acronym suggests.
“Many of us expect that the role of China in supply chains that serve the U.S. from Canada, but in particular, Mexico, would be on the table, would be an issue,” Lovely said. “Whether it is in this case I think is just speculation, since President-elect Trump said nothing about that in the social media post he made last night.”
For how world trade leaders reacted to Trump’s social media post, check out Tuesday’s Unbiased Updates.
![TASS [🇷🇺-affiliated] logo](https://groundnews.b-cdn.net/interests/1c364c1e553231a17f22d4a16db85a51fb715dd3.jpg)
![Russia Today [🇷🇺-affiliated] logo](https://groundnews.b-cdn.net/interests/d3a6b2444d4740f3e75a430e54a0cb4d24ee6cc6.jpg)
![Lenta.RU [🇷🇺-affiliated] logo](https://groundnews.b-cdn.net/interests/54d337f93d4216c40f0bbf0a3a7b46c926c46551.jpg)
![Sputnik Globe [🇷🇺-affiliated] logo](https://groundnews.b-cdn.net/interests/e68d7b37f05a67679cc6152365afdd6e33dafdc1.jpg)
![[Satire] El Deforma logo](https://groundnews.b-cdn.net/assets/letterIcons/square/00C853/other.png)
