In the first months of his administration, U.S. President Donald Trump has fulfilled campaign promises to enact sweeping tariffs, with broad measures against China, Canada, and Mexico coming into force in March. President Trump has threatened numerous additional measures, including a measure to implement reciprocal tariffs against countries with high trade barriers against U.S. goods scheduled to go into effect on April 2 as well as tariffs of 25% on cars and car parts that could start going into effect from April as well. These policy changes have prompted swift countermeasures from other countries that began coming into effect in March. As international trade relations face an upheaval not seen in decades, this new biweekly series will cover major developments related to new trade barriers and their impacts on supply chains.
New U.S. tariffs on Mexico and Canada and expanded tariffs on China come into force
Following a one-month delay in implementation for further negotiations, President Trump enacted a 25% tariff on most Canadian and Mexican imports on March 4. Although President Trump had initially promised a full 25% tariff on all goods with no exemptions, the measure currently does not apply to goods covered by the United States-Mexico-Canada Agreement (USMCA), accounting for approximately 38% of Canadian imports and 49.6% of Mexican imports into the U.S. in 2024. The tariffs also exclude automobile and automotive part imports. The Trump administration has threatened that these exemptions will expire on April 2. The tariff rate has also been decreased to 10% for imports of Canadian energy products.
The Canadian government immediately imposed counter-tariffs on March 4, implementing a 25% tariff on a more targeted selection of goods including agriculture, food and beverage products, personal care products, some paper and cardboard products, and motorcycles. Mexican President Claudia Sheinbaum has promised to enact counter-tariffs, but her administration plans to wait until after April 2 to determine whether USMCA-covered goods will eventually be affected before announcing policy measures.
President Trump also issued a 25% tariff on all imports of steel and aluminum products on March 12 with no exemptions. The measure is expected to significantly increase prices in the metalworking, automotive components, aerospace components, industrial packaging, and general manufacturing sectors. The U.S. imports approximately 26% of its primary steel and 44% of its primary aluminum. The tariff will disproportionately impact Canada, which supplies over half of all U.S. aluminum imports and sends nearly all its steel exports to the U.S. In response, the Canadian government announced a second round of retaliatory tariffs on C$29.8 billion (€19.3 billion/$20 billion) of U.S. goods, including steel and aluminum products, consumer electronics, sports equipment, and cast-iron products, effective from March 13.
Additionally, on March 4, President Trump increased his previous 10% tariff on Chinese imports to 20%. The move will likely continue to impact sectors with heavy Chinese imports to the U.S., including consumer goods, consumer electronics, and electronic components. In response, the Chinese government enacted its first round of counter-tariffs on March 10. The Chinese tariffs range from 10-15% and target mainly agricultural goods and livestock products.
Reciprocal tariff announcement likely on April 2 while discussions continue on other tariffs
President Trump has already announced many additional plans to enact trade barriers, including a plan to enact reciprocal tariffs that would match the tariff rates that U.S. trade partners charge on imports of American goods. A formal announcement is expected on April 2, but the administration has not specified precise details amid internal debates. Recent reports indicate the current plan would only affect around 15% of trade partners with the most persistent trade imbalances with the U.S., termed as the “Dirty 15” by the U.S. Treasury Secretary. They could include Australia, Brazil, Canada, China, the European Union, India, Japan, South Korea, Mexico, Russia, and Vietnam. Under the plan, each of these trade partners would be given an individualized tariff rate based on the extent of their trade imbalance. The Trump administration has not specified if these rates would replace current tariffs on Canada, China, or Mexico.
Since the details of the reciprocal tariffs remain unclear, trade partners including Mexico, India, and the European Union continue to engage in negotiations with the U.S., and some have indicated that they will wait to enact countermeasures until a more detailed policy plan is announced. The E.U. has detailed a comprehensive response which also responds to the March 12 U.S. steel and aluminum tariffs and may be effective from April 13. The bloc plans to set tariffs of up to 50% on €26 billion ($28 billion) of targeted U.S. goods, with affected products including motorcycles, fresh produce, livestock, and alcoholic beverages.
On March 24, President Trump announced plans to enact 25% tariffs on any country that purchases oil and gas products from Venezuela due to the alleged presence of Venezuelan criminals and gang members in the U.S. These tariffs will also be enacted on April 2. In recent months, the top buyers of Venezuelan oil included the U.S., China, India, and Spain. However, the amounts purchased by these countries do not constitute a significant portion of their imports, indicating that affected countries may be able to divert oil imports to other trade partners. On March 26, President Trump also confirmed plans to implement tariffs of 25% on cars and car parts coming into the country around the same time the reciprocal tariffs will be enacted. Taxes on imported cars will reportedly be charged from April 3, while the new taxes on car parts are expected to be charged from May at the earliest. Car parts that comply with the U.S.-Mexico-Canada Agreement will reportedly remain tariff-free until the Commerce Department has established a new process that would cover them as well. Mexico, South Korea, Japan, Canada and Germany are among the top suppliers of cars to the U.S and are likely to be impacted the most by any tariffs targeting the sector.
Several other trade measures have been proposed by the Trump administration, but the timeline for their implementation has not been specified. President Trump has indicated he will sign an Executive Order to implement fees of up to $1 million (€921,720) per U.S. port of call on ships operated by Chinese companies and fees of up to up to $1.5 million (€ 1.3 million) per U.S. port of call by Chinese-built or flagged vessels. If enacted, the measure would be highly disruptive to ocean shipping, as Chinese-built vessels accounted for around 17% of all vessel calls at U.S. ports in 2024. Sectors that could see an immediate impact include agriculture, energy, chemicals, oil and gas, and consumer goods.
Under the same authority that directed tariffs on steel and aluminum products, the U.S. Commerce Department has launched a national security investigation into imports of copper products. New tariffs on copper could be released pending the result of the investigation. It is unknown when those results will be released, although administration officials have indicated there will be a quick turnaround. Additionally, President Trump has also threatened sector-specific tariffs affecting semiconductors, microchips, and pharmaceuticals. His administration has confirmed that they do not plan to announce these tariffs on April 2 and have not made additional comments on whether they are still likely.
Tariff threats cause uncertainty as companies try to pre-empt future actions
The changing trade environment in the U.S. has prompted considerable concern from companies amid uncertainty on if tariffs will ultimately be applied and how long they will last. Following President Trump’s election, there was an uptick in shipping activity as companies rushed to move goods prior to the implementation of tariffs. Additionally, warehouse capacity in California and Texas has diminished due to companies stockpiling goods in anticipation of further tariffs on Mexico. Strong shipping demand is expected to persist through May, but a decline is anticipated in June and July as frontloading subsides. Additionally, customs delays have been reported at U.S. land borders with Mexico and Canada, prompting some companies to reroute shipments directly to U.S. Gulf Coast or West Coast ports to bypass bottlenecks.
Given the multitude of questions surrounding how permanent these tariffs will be, these new policy changes have made it difficult to for companies to forge a long-term strategy on reducing tariff costs, such as by adjusting plant or supplier locations. Complicating matters, many countries such as Vietnam and India that would have been considered as alternative locations to China, Canada, and Mexico may now be targeted by reciprocal tariffs. The companies that will be most impacted are those that operate on slim profit margins or rely on just-in-time manufacturing and cannot handle rapid increases in cost or component wait times. If the tariffs continue at their current magnitude for several months, an increase in supplier plant closures and insolvencies are possible, particularly for companies reliant on free trade between the U.S., Canada, and Mexico.
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