At the beginning of this month, former U.S. President Donald Trump signed an executive order imposing a universal 25% tariff on all imports from Mexico and Canada, and a 10% tariff on imports from China. Experts in international trade consider such broad tariffs to be severe, especially when targeting major trade partners. The only exception was Canadian energy imports, which received a reduced 10% tariff.
According to a statement from the White House, these tariffs will remain in effect «until drugs, particularly fentanyl, and illegal immigration cease invading our country.»
Shortly after the announcement, Mexico’s President Claudia Sheinbaum declared that her administration would implement tariff and non-tariff measures to defend national interests, though details have yet to be disclosed. Meanwhile, Canadian Prime Minister Justin Trudeau announced retaliatory tariffs of 25% on U.S. products worth 155 billion Canadian dollars (approximately $100 billion USD).
How Will This Impact Mexico?
Prior to the announcement, skepticism existed in Mexico regarding the likelihood of a blanket 25% tariff, with many believing that only specific goods would be targeted. However, the sweeping nature of the tariff came as a surprise.
“This will push Mexico into a recession,” stated Valeria Moy, Director General of the Mexican Institute for Competitiveness (IMCO), in an interview with BBC Mundo. She also criticized the reasoning behind the tariffs, calling it «absurd» to tie trade policy to immigration and drug control.
As the United States’ largest trading partner, Mexico sends over 80% of its exports north. The newly imposed tariffs present a significant challenge to an economy heavily reliant on U.S. trade, particularly in industries such as automotive manufacturing, semiconductors, oil, and agriculture.
Economists and business leaders warn that the impact extends beyond exports. The tariffs could negatively affect Mexico’s GDP, employment rates, investment inflows, remittances, and the value of the peso.
Understanding Tariffs and Their Consequences
Tariffs function as import taxes paid by the importing country. In this case, U.S. importers will bear the added costs at customs, which are often passed on to consumers through higher prices. While Trump argues that these tariffs will «enrich Americans» by increasing government revenue and boosting domestic manufacturing, most economists disagree.
«It’s absurd to impose tariffs on your top three trade partners, particularly Canada and Mexico,» commented Kimberly Clausing, a senior researcher at the Peterson Institute for International Economics. She warned that such tariffs harm not only foreign exporters but also American consumers, workers, and manufacturers.
Key Sectors Most Affected
Mexico’s automotive and electronics industries—accounting for nearly half of the country’s exports to the U.S.—will be hit hardest. In 2023 alone, these sectors generated around $200 billion in exports. Key products at risk include auto parts, trucks, computers, medical equipment, refrigerators, and other manufactured goods. Additional industries facing disruptions include energy, steel, aluminum, semiconductors, pharmaceuticals, agriculture, furniture, and beverages such as beer and tequila.
Pedro Casas, Vice President and General Director of the American Chamber of Commerce in Mexico (AmCham), emphasized that businesses and consumers across all three economies will suffer. He highlighted the risks of higher production costs, job losses, inflation, and reduced purchasing power for families.
The Bigger Picture: A Threat to North American Trade
These tariffs challenge the 30-year-old free trade system that has fostered deep economic integration among the U.S., Mexico, and Canada. Many manufactured goods cross borders multiple times before final assembly, and additional tariffs at each stage could significantly increase costs, threatening the survival of many factories.
Since Trump’s first term, U.S. investment in Mexico’s manufacturing sector has surged due to lower labor costs and the USMCA (formerly NAFTA), which took effect in 2020. Experts caution that these tariffs could jeopardize the stability of this trade agreement unless a resolution is reached.
The ultimate impact on North American economies will depend on how long the tariffs remain in place. If Trump lifts them within weeks, the damage may be minimal. However, if they persist for a year or more, businesses on both sides of the border may struggle to cope. Additionally, uncertainty over trade policy could deter future investments in Mexico, leaving lasting economic scars.
For Mexico, these developments pose a major challenge to President Sheinbaum’s «Plan Mexico,» aimed at strengthening domestic industries and attracting long-term investments. The coming months will be crucial in determining how Mexico navigates this new economic landscape.
