This is a post from David Gantz, Will Clayton Fellow, Baker Institute for Public Policy, Mexico Center; Samuel M. Fegtly Professor Emeritus, College of Law, the University of Arizona.
Part I: Introduction
This report addresses the challenges to the continued viability of the United States-Mexico Canada Agreement (USMCA), and more broadly, the future of North American economic and trade relations.[1] The USMCA provides for a mandatory review in July 2026, but the United States under President Donald J. Trump has already substantially and unilaterally modified (i.e., violated) the agreement.[2] The U.S. has imposed 50% tariffs on Canadian and Mexican (and all other) source aluminum and steel, and 25% tariffs on autos and auto parts (with some variations). He has imposed 25% tariffs as well on any other imports of goods that do not meet USMCA rules of origin — discussed more fully in Part II. These wholesale violations of USMCA provisions have raised serious doubts about the continued viability of the USMCA, particularly with the three governments and their stakeholders in all three countries. After all, Mexico and Canada are the United States’ first and third largest trading partners, and both Canada and Mexico are dependent on the U.S. for most of their exports, 80% in the case of Mexico and about 78% for Canada.
Among the challenges is figuring out what Trump wants. Is it expansion of the U.S. manufacturing base? Reduction of trade deficits on a country-by-country basis? Increased government revenue so Congress can enact further tax reductions (primarily for the wealthy)? A stronger (or weaker) dollar? Punishment of China? Does he intend to continue to ignore trade in services, where the United States runs a substantial world-wide surplus?[3] These questions are not answered in this report but remain relevant.
The stakes for all three USMCA parties are enormous, threatening recessions or severe economic downturns, suspension of most new investments and hiring throughout the region, and increased unemployment in all three countries, particularly in the automotive sector in Canada and Mexico. In the United States, the tariffs on imports from Canada and Mexico, and those on virtually all other U.S. trading partners, are a federal tax on all businesses and consumers that rely directly or indirectly on goods from outside the U.S. Those increased taxes will cause widespread pain for many, particularly low-income workers, who spend all their weekly paychecks on food, clothing, rent, gasoline, medical expenses and other essentials, workers who may well see their access to Medicaid and food stamps reduced or eliminated if Trump’s “big, beautiful tax bill” in enacted by Congress.[4] Under the best of circumstances, businesses and consumers will pay more, while cost increases and foreign country retaliation will reduce U.S. exports. Arguments can be made for strongly encouraging U.S. manufacturing in chips, EVs and EV batteries and pharmaceutical products among others, but U.S. manufacturing for such basic items as footwear, clothing, smart phones and TV sets will never return to the United States because of high labor costs and the lack of adequate supply chains.
The remainder of this report is divided into four parts.
- Part II discusses U.S. tariffs, on Canada, Mexico and the rest of the world.
- Part III discusses the impact.
- Part IV addresses recommendations for the path forward for both Mexico and Canada.
- Part V addresses key longer-term issues.
It is important to keep in mind that Trump’s tariffs are new, imposed in the first five months of his administration, and are always subject to unexpected changes. For example, the high reciprocal tariffs initially proposed April 2 were postponed, from April 9 to July 8, apparently because the stock market exhibited significant decline and the bond market saw an historic outflow of U.S. government bond revenue and an increase in interest rates paid by the Treasury Department.[5] The 145% tariffs initially imposed on China, effectively an embargo, were drastically reduced on May 14, to an aggregate of 30%, for at least 90 days.[6] (With the Phase One tariffs imposed during Trump's first term on about two thirds of U.S. imports from China. Initially, they were mostly 25%, although Biden raised some tariffs in October2024, to100% on EVs, 25% on EV batteries and 50% on solar cells.[7] Currently the effective rate is 55% plus the U.S. most-favored nation—MFN--tariff.[8]) Similar abrupt changes are possible at any time.
Part II: The US Tariff Program
What Are Tariffs, Who Pays Them and Why?
United States tariffs are federal taxes paid into the U.S. Treasury by importers of record. Typically, tariff levels are limited by (or “bound”) by international agreements, the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization 1995 agreements, as well as through regional trade agreements such as the USMCA. Despite some tariff peaks, particularly for agricultural imports, U.S. tariffs averaged less than 3% until recently, when they now (as of May 14) have increased almost sixfold, to average about 17.8% (including China).[9]
Once tariffs are paid, much or most of the amounts are passed up the supply chain to manufacturers, retailers and to consumers. Notwithstanding U.S. administration assertions, foreign exporters do not typically pay all or a major portion of the tariffs either directly or indirectly. In some instances, the foreign exporter may be encouraged by giant importers such as Walmart, Apple or Nike, to lower their prices to partially offset the tariff increases. In others, the U.S. wholesaler or manufacturer may offset part of the increase, as may occur at the retail level as well. Such actions depend in significant part on elasticities of demand in particular product sectors. What is certain is that consumers will pay more for the same products.
Historical Context
For most of its nearly 250-year history, the U.S. was a high tariff jurisdiction, with two main policy objectives: (1) to raise revenue and (2) to encourage industrialization through import substitution, often at the expense of agriculture. After the income tax amendment to the U.S. Constitution in 1913, income taxes began to replace tariff revenues, with the latter falling to about 2% of government revenue until recently.[10]
The Franklin D. Roosevelt/Cordell Hull era in the 1930s, reacting to the 1930 Hawley-Smoot tariff, saw extensive reciprocal tariff reduction between the United States and its trading partners, which later expanded with the advent of GATT in 1947. However, by 2015, U.S. Congressional opinion, in both political parties, favoring globalization began to change, mostly as a result of China’s expanding industrial subsidies and other WTO-illegal trade practices under Chairman Xi, and the loss of American jobs to low-labor cost countries such as China and Mexico.[11]
The current base tariffs of 10% imposed by the Trump administration on all trading partners appear to be supported by many Democrats, even if they reject treatment of allies such as Japan, Korea, the EU, Mexico, Canada and Taiwan as adversaries. Business views are more mixed. For many businesses, the chaos and uncertainties of the administration’s tariff policies are as bad as the tariffs themselves, because it is impossible to plan new investments and hiring, and small businesses without lobbying influence are more likely to fail to obtain exceptions than large multinationals, despite some congressional support.[12] While many members of Congress and unions have favored high import tariffs on steel, it is estimated that for each job gained in steel production five are lost elsewhere in the economy.[13]
Key Examples of the Impact
Recent economic analysis suggests that in the automotive industry, the Trump tariffs if sustained will add $3,000 to more than $10,000 to the cost of a new vehicle. Vehicles assembled in the U.S. typically rely on a supply chain consisting of thousands of parts and components from Mexico, Canada and many other countries. For example, large General Motors SUVs such as the Suburban and Tahoe assembled in Arlington, Texas depend on imported parts from Mexico, South Korea and elsewhere; less than 40% of the vehicle cost is attributed to the U.S. and Canada.[14] An independent consulting group estimates that the tariff burden for the Chevrolet Suburban will increase by just under $8,000, while the Ford Mach-e crossover assembled in Mexico will see a cost increase of $12,000.[15] Whether the entire increased cost is passed on to the auto buyer depends on several factors, including profit levels for GM and its dealers, consumer demand, the overall health of the U.S. economy, and interest costs.
The food sector is different given that supermarket margins are usually in the 1.6% net profit after taxes range.[16] Foodstuffs imported from Canada and Mexico (such as Mexican avocadoes and asparagus and Canadian tomatoes), produced wholly in the territories of one or more of the USMCA countries, currently enter the U.S. duty-free, as discussed below. Blueberries from Peru and salmon from Chile, are subject — at least until July 8, 2025 — to 10% tariffs, which seem likely to be passed on almost entirely to the supermarket customer. In each case, duty-free treatment is not automatic; it must be formally requested in the customs documents and depends on the existence of a valid certificate of origin for each product.
Petroleum products including crude oil from Alberta or Mexico and electricity from Quebec, also should be subject of zero-tariffs as originating products. The same formal requirements apply here. The absence of such documents in the past in many instances reflected the fact that the administrative cost of obtaining the formal documents was avoided as unnecessary because energy products traded either duty-free or at very low tariffs worldwide.
Still, many goods made in Mexico and Canada are not entitled to duty-free treatment under the rules or origin. For example, Lenovo laptops assembled in Nuevo León, Mexico in the past did not have to comply with rules of origin because they trade duty-free among 84 countries representing 97% of world trade in IT products.[17] Because of the high levels of imported parts and components, 25% duties would now apply.
Similarly, it is estimated that 12–15% of the autos and SUVs assembled in Mexico have not qualified for duty-free treatment because they cannot meet onerous rules of origin, including 75% North American content and 40% of their value produced in facilities where the hourly wage is at least $16 per hour.[18] With the U.S. MFN duty of only 2.5%, the cost of paying the duty was likely less than seeking full USMCA compliance. This situation no longer exists.
Current (as of June 19) Trump Tariffs on Mexico (and Canada)
Importers of goods from Mexico and Canada pay no tariffs on exports to the U.S. that satisfy USMCA rules of origin — except for certain products steel (50%), aluminum (50%) and autos and parts. Other duty-free goods amounted to about 50% of Mexican exports and 38% of Canadian exports in March, likely more today as all goods eligible for USMCA treatment are now formally requesting it.[19] Goods not originating Goods imported from Mexico and Canada that do not meet USMCA rules of origin are subject generally to tariffs of 25%.[20] Autos are subject to 25% tariffs, regardless of USMCA origin, with a credit for their U.S. content and for tariffs paid on aluminum and steel, plus a 3.75% import adjustment credit for two years based on the MSRP of all autos assembled in the U.S. (with other details pending).[21] Auto parts that meet USMCA rules are tariff free until U.S. Customs and Border Protection (CBP) comes up with a plan to apply tariffs to their non-U.S. content; others from all country sources pay 25% now.[22]
New tariffs on copper and chips under consideration.[23] In addition, the Trump administration in June extended the 50% steel tariffs to "derivative products," including large household appliances such as washers and refrigerators.[24]
Current Tariffs for Other Countries
For competitive reasons, it is important to be aware of Trump tariff levels on other U.S. trading partners whose goods compete in the U.S. market with those from Mexico and Canada. These initially included 145% tariffs on imports from China, with exceptions for smartphones, laptop computers, flat screen TVs, and some other products (20%).[25] On the basis of a tentative agreement, the China tariffs were reduced May 14 to 30% (plus earlier Phase One tariffs of 25%).[26] The administration also repealed the de minimis rule that historically exempted shipments of $800 or less from China and Hong Kong from all tariffs.[27] As of June 19, the only other trade agreement announced by the administration was between the U.K. and the United States, with a partial implementing agreement signed June 16, 2025 .[28] (That agreement postpones the promised US tariff reduction on steel and aluminum imports from the U.K. to a later time.)
Base tariffs of 10% apply to most imports other than steel, aluminum, home appliances and automotive goods from virtually all countries.[29] However, many countries were initially assigned much higher "reciprocal” tariffs, e.g., EU (20%), South Korea (25%), Japan (24%), Taiwan (32%), Vietnam (46%), Madagascar (47%) and Lesotho (50%) based on a bogus formula supposedly considering trade surpluses.[30] Negotiations with several of these countries, including Japan and the EU (both apparently considered by Trump to be very difficult), were under way as of late June.[31]
Reciprocal tariffs were broadly postponed from April 9 to July 9 pending negotiations supposedly taking place currently between the affected countries and the United States, although it will be virtually impossible to complete even a fraction of such negotiations in the time available.[32] These third country tariffs are important to this discussion, because they are both less and more favorable than the tariffs being applied to goods from Mexico and Canada.
- They are less favorable because exports to the U.S. from Mexico and Canada that meet USMCA origin requirements — likely to increase as proper documentation is routinely filed — are the only imports that may still enter the United States duty-free (except aluminum, steel, autos and auto parts).
- They are more favorable, at least until July 8, because non-originating goods under the USMCA are dutiable at 25%, while those from most other countries except China are dutiable at 10%.
Part III: Summary of Country Specific Impacts
Assessing the likely impact of the Trump tariffs at this early date, before they have been in force for any length of time, is risky. However, in my view the predicted results may be accurate even if the impact does not fully manifest itself until midsummer 2025 or later.
Impact on the United States
When the same goods cost more than they did in the past, without any increase in benefits to consumers, the impact is inflationary. Price increases for consumers and sellers of the same autos and auto parts, food, housing, clothing and shoes, home appliances, and the like provide no additional benefits; nothing changes other than the prices. Also, uncertainties regarding future tariffs and other policies are devastating both for businesses and consumers, Consumers may defer purchases while businesses are reluctant to make new investments, or to increase (or even maintain) employment levels. Consider restaurants, which will face increased food prices and perhaps salary costs as well, when declining consumer confidence encourages many potential customers to avoid the expense of restaurant meals.[33]
Inflation also reduces the value of the dollar. Investors holding U.S. Treasury dollar reserves, whether U.S. or foreign, become more reluctant to maintain investments as their value declines. Pressure on dollar reserves, along with inflation, where many economists and financiers see a 40–60% chance of a recession later in 2025, may further dampen consumer confidence and spending. Inflation also tends to keep interest rates high.[34]
Some U.S. small and medium-sized enterprises (SMEs), particularly in the automotive sector and those dependent on parts imports from China, may fail, as the Chamber of Commerce and others have recognized.[35] Various trade organizations have warned the administration that the tariff implementation changes, including those directed at China, will create severe supply chain challenges, including port congestion, inaccessible vessel capacity, high freight rates and shipment delays.[36]Also, some U.S. enterprises that produce low-labor cost elements of their goods through co-production with Mexican enterprises will see higher costs if supply chain production is shifted to the U.S.[37]
Finally, many Americans are likely to experience lower living standards, reduced buying power and layoffs. Recent data suggests that almost half of Americans are already living paycheck to paycheck just to cover rent, food, clothing, transportation and medical costs.[38] Those Americans, in particular, have no way of avoiding the pain of a tax increase brought on by the increased Trump tariffs, even if they are ultimately reduced to 10% except for steel, aluminum and automotive goods.
Impact on Mexico
Job losses, particularly in the automotive sector, could reach tens of thousands as auto and auto parts producers suspend operations in Mexico and seek to shift production to the U.S. According to the U.S. International Trade Administration, the automotive sector in Mexico is responsible for 3.6% of Mexico’s GDP and employs over one million workers.[39] Early examples include:
- Honda has already indicated that it would move production of its small Civic from Mexico to the United States, effective in 2027.[40]
- General Motors is shifting some of its small truck production to the U.S. from Canada and Mexico, effectively almost immediately, through the speeding up of its assembly line and the hiring of a few hundred temporary workers.[41]
Resulting unemployment in this sector alone could cause a recession. An economic downturn in the U.S., causing Americans to purchase fewer goods from Mexico and other sources, could exacerbate recessionary pressures in Mexico.
Uncertainty for investors caused by the Trump tariffs and exacerbated by the ongoing judicial reform and other anti-business Sheinbaum/Lopez Obrador/Morena policies, will continue to slow needed foreign investment. Bank of Mexico data shows new FDI declined 34% compared to the preliminary total for 2023. New “greenfield” investment as a share of total FDI fell more than four points from just over 13% in 2023.[42]
Mexico remains plagued by a chronic electricity shortage due in part to investors not wishing to deal with the discriminatory Comision Federal de Electridad (CFE) government monopoly and the lack of transparency in dealing with the Secretariat of Energy. It is unclear whether President Sheinbaum’s new efforts to increase investment in the sector will be successful.[43] An economic downturn may temporarily reduce energy shortages, at the cost of other parts of the economy.
Impact on Canada
An automotive-driven recession is also likely in Canada as automakers furlough workers, close factories, and seek to shift production to the U.S., although employment at about 125,000 (2022) was considerably lower.[44] Energy, potash, and food products may remain unscathed. Lumber originating in Canada, subject to U.S. trade actions for more than 40 years, may be subject to higher tariffs. Canada is also subject to Trump’s near-universal tariffs of 50% on steel and aluminum. Canada traditionally supplies the U.S. with almost 80% of U.S. aluminum imports and about 40% of U.S. steel imports. The U.S. accounts for over 90% of Canadian steel and aluminum exports. The renewal of the tariffs would apply to roughly $24 billion of Canadian exports.[45]
Part IV: Possible Remedies
Common Interests in Canada and Mexico
Despite the encouragement of several Canadian premiers (Danielle Smith in Alberta, Doug Ford in Ontario) of a new bilateral trade agreement with the United States, effectively isolating Mexico if the effort were to be successful, such an approach runs significant risks for Canada as well as Mexico. First, Canada and Mexico have a common interest in trying to rein the excesses of the Trump administration, an objective where two countries, the largest and third largest U.S. trading partners, seem obviously better than one. Second, both countries are heavily dependent on many of the same export sectors, including foodstuffs, petroleum, steel, aluminum, autos and auto parts, the last four of which are currently subject to extraordinarily high tariffs. Third, as explored more fully below, cooperation on the agenda for the 2026 USMCA review is likely to produce better results than a one-on-one negotiation. Finally, a bilateral negotiation would give the Trump administration an opportunity to pursue extraneous issues, such as Canada’s low level of contributions to NATO defense and an often-repeated desire to make Canada the 51st U.S. state!
The prospect of a mandatory review of the USMCA in mid-2026 provides both risks and potential rewards. Even though based on current practice the Trump administration may not feel obligated to comply with any agreements reached, the review process by its terms may continue annually until 2035 unless all three parties agree on revisions. Since Congress cannot be relied on to assert any of its authority under the Commerce Clause of the U.S. Constitution, Mexico and Canada must rely to the extent practical on support from stakeholders in all three countries.
The Trump administration has already flagrantly violated multiple provisions of the USMCA including those providing for a free trade area under GATT article XXIV (which requires, inter alia, the elimination of duties on substantially all trade among the members) incorporated by reference into the USMCA; rules of origin which when met provide for duty free trade in originating goods and are incorporated into Chapter 98 of the Harmonized Tariff Schedules of the United States.[46] The idea that imports of steel, aluminum, home appliances and autos from Canada and Mexico constitute a national security threat to the United States, with now 50% duties applied under the authority of section 232 of the 1962 Trade Expansion Act, is ludicrous, particularly when high duties are applied on the same grounds to the automotive sector.
Should interested parties challenge this conclusion, which the Trump administration defends under the USMCA exception for “protection of its own essential security interests" (an issue for which it asserts that trade panels may not offer a judgment), no USMCA panel is likely to agree. In the past, the Supreme Court has declined to review section 232 challenges that have been rejected by the lower courts..[47] Multiple U.S. court challenges of the tariff actions based on the IEEPA are pending, and the Court of International Trade found in June that the tariffs based on a “national emergency” under the International Economic Emergency Powers Act exceeded presidential powers.[48] However, the Court of Appeals stayed the CIT decision pending a full review.[49]
Trump’s position on the 2026 USMCA review is ambiguous. In early May, he suggested that the USMCA was a “transitional deal,” and opined, “I don’t know that it is necessary anymore.” However, he left open whether he believes that the USMCA should continue in force if and when the review process begins later in 2025.[50] As indicated earlier, it is obvious that he is unconstrained by U.S. obligations accepted in the USMCA. That being said, the review mechanism was included in the USMCA at the behest of the U.S. negotiators.
Remedies for Mexico
Mexico would be wise to expand its efforts to diversify its current trade 80% dependence away from U.S. to the extent possible, focusing on Japan, EU, Mercosur, the Comprehensive Trans-Pacific Partnership (CPTPP) and other FTA partners. Another possibility, encouraging additional Chinese investment, particularly in autos and auto parts, risks an adverse political reaction by Trump.
More importantly, Mexico should take advantage of the current situation (if it lasts) under which goods from Mexico that meet USMCA rules or origin are the only ones that can enter the U.S. duty free. This consideration applies equally to Canada.
It is also essential for Mexico to encourage further nearshoring investment by producers —except from China – whose goods would qualify as originating goods under the USMCA, or which could qualify in the short or medium term. In this respect it is essential to avoid supporting entities that are vulnerable to accusations of tariff circumvention. Although the problem is largely the tariffs and other uncertainties created by Trump, robust investment, including greenfield (new) investment also depends on Mexico. In particular, businesses and other stakeholders should put pressure on President Sheinbaum and her Morena party to improve the business climate, particularly as it relates to CFE and clean electric energy generation, government transparency, competence and independence of the judiciary, and the rule of law more generally. In this respect, the first 8-9 months of the Sheinbaum administration are not promising.
As part of this process, business and government should cooperate to accelerate investment in intermediate goods producers, particularly in electronics and other high-tech fields. President Sheinbaum should also be strongly encouraged to solicit business and investor input for the 2026 USMCA review/renegotiation.
Remedies for Canada
Ongoing U.S.-Canada economic and political relations are uncertain but remain troubling. Trump’s treatment of former prime minister Justin Trudeau and threats to make Canada the 51st state have poisoned previously friendly U.S.-Canadian relations that may not be repaired for a generation. Many Canadians are no longer visiting the U.S. (which will benefit Mexican tourism).
The first, mostly cordial meeting, between the U.S. president and newly elected Canadian Prime Minister Mark Carney took place on May 6, but many uncertainties remain.[51]
For Canada, it is important that the Carney government work to improve relations between eastern Canada and the west, particularly Alberta, where the Conservative Party won most of the votes, including with a more rational approach to the energy sector. Support for succession by Albertans, to join the United States, could further complicate Carney’s efforts.[52]
Like Mexico, it is also critical for Canada to expand efforts to diversify its export base away from its current 78% dependence on the U.S. This is difficult but a focus on expanded trade with the CPTPP, the EU, the U.K. and Japan should be priorities. Reduction of chronic barriers to trade among the ten Canadian provinces is also badly overdue. Canada has no equivalent to the Commerce Clause of the U.S. Constitution, which, for over more than two hundred years, has minimized economic barriers among the fifty states, and it shows. Those many barriers need to be reduced, along with productivity, increases, infrastructure repair and increased R&D. Other aspects of Trump’s domestic policies, drastically reducing government funding for R&D in universities and elsewhere, offer Canada a golden opportunity for scientific and high-tech recruiting of American citizens and permanent residents seeking to relocate, as well as foreign students that no longer feel welcome or safe in the United States, if Canada’s immigration system will permit it.
Part V: Longer Term Issues
If the 10% base tariff becomes semi-permanent under Trump, a future, protectionist Democratic administration is not likely to repeal it altogether, although improved treatment is seems likely for the EU, the U.K., Taiwan, South Korea, Japan and other allies, and treatment of Mexico and Canada may also improve. U.S. industrial policy, whether tariff- or subsidy-based, will not disappear, and a return to pre-2015 U.S. policies supporting globalization, expanded trade, lower tariffs and economic development is in my view extremely unlikely. Nor is China likely to receive more favorable treatment.
Moreover, political, economic and security concerns about China will continue to dominate U.S. economic policies, possibly with some mitigation of tariff levels but also with increased efforts to reduce Chinese evasion of tariffs through trans-shipping (with Mexico one of the countries in the crosshairs) or under-valuing of goods for customs purposes. A more moderate approach may be possible; Treasury Secretary Bessent emphasized May 12 that “We do not want a generalized decoupling from China” except for strategic necessities.[53] It is not clear that Trump or his other advisors share this view. However, if the U.S. forces countries to choose between the U.S. and China, as appears to be current U.S. policy, many, perhaps most, will choose China. Even in South America, notwithstanding the 1823 Monroe Doctrine and given U.S. benign neglect of Latin America in recent decades, all countries now trade more with China than they do with the United States.[54]
While it is not specifically a trade issue, the U.S. government’s near-elimination of funding for basic research including medical and scientific research and education will adversely impact on U.S. services trade (which currently enjoys a large trade surplus) among other areas, helping China to take world leadership in chips and AI as well as in EVs, EV batteries and solar panels.[55]
More than a dozen U.S. free trade agreements have been flagrantly violated during this administration’s first five months, including not only the USMCA but FTAs with Australia, Central America, Chile, Colombia, the Dominican Republic, Panama, Peru and Singapore, leaving U.S. reliability as a treaty partner seriously threatened if not destroyed. Trump’s “America Alone” policy, without an achievable end game in the view of many experts, is leading to a loss of American political, economic and military power vis-à-vis China, with allies and adversaries alike, the effects of which are likely to remain.
The security implications for Mexico (and Canada) of a weaker United States and increasing Chinese and Russian influence world-wide, are potentially serious but difficult to catalog at the present time.
Notes
* Will Clayton Fellow, Baker Institute for Public Policy, Mexico Center; Samuel M. Fegtly Professor Emeritus, College of Law, the University of Arizona. Copyright© David A. Gantz 2025.
[1] Agreement between the United States of America, Mexico and Canada (USMCA), November 30, 2018, in force, July 1, 2020, https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement/agreement-between.
[2] USMCA, article 34.7.
[3] in 2023 the United States exported over $1,025 billion of services. It imported $748 billion, yielding a trade surplus for services of some $278 billion. See Simon Evenett, “Crossfire: The U.S. Trade Surplus in Services as America Contemplates an Inward Turn,” Global Trade Alert, November 25, 2024, https://globaltradealert.org/reports/crossfire/.
[4] See Theodore Meyer and Jacob Bogage, “GOP tax bill could hurt the poorest households more than it helps them,” June 16, 2025, Washington Post, https://www.washingtonpost.com/politics/2025/06/16/trump-tax-bill-low-income/.
[5] Rob Wile, “Stocks Unleash Remarkable Comeback After a Historic Dive from Trump’s Tariffs Announcement,” May 4, 2025, NBC News, https://www.nbcnews.com/business/markets/stocks-unleash-remarkable-comeback-after-volatile-month-trump-tariffs-rcna204213.
[6] “Fact Sheet: President Donald J. Trump Secures a Historic Trade Win for the United States,” May 12, 2025, The White House Maclellan et al., “US-China Trade Deal as It Happened: Tariffs to Be Lowered for 90 Days, US Stocks Rally,” May 12, 2025, Reuters, https://www.reuters.com/world/us-china-tariff-live-updates-bessent-greer-announce-details-constructive-geneva-2025-05-12/.
[7] See Katie Lobosco,” Biden finalizes increases to some of Trump’s China tariffs,” September 13, 2024, CNN Politics, https://www.cnn.com/2024/09/13/politics/china-tariffs-biden-trump.
[8] Lisa O’Carroll and Dominic Rushe, “Trump says China will face 55% tariffs as he endorses trade deal,” June 11, 2025, The Guardian, https://www.theguardian.com/business/2025/jun/11/trump-says-china-will-face-55-percent-tariffs-us-trade-deal-rare-earth-minerals.
[9] “State of U.S. Tariffs: May 12, 2025,” The Budget Lab at Yale, May 12, 2025, https://budgetlab.yale.edu/research/state-us-tariffs-may-12-2025; See also Chad E. Brown, “US-China Trade War Tariffs: An Up-to-Date Chart,” Peterson Institute for International Economics, May 14, 2025, https://www.piie.com/research/piie-charts/2019/us-china-trade-war-tariffs-date-chart.
[10] Douglas Irwin, Clashing Over Commerce: A History of US Trade Policy, (Kindle ed., 2022). [[University of Chicago Press, November 2017?? (Markets and Governments in Economic History SERIES]]
[11] See, e.g., John Rennie Short, “Globalization and Its Discontents: Why There’s a Backlash and How It Needs to Change,” The Conversation, November 28, 2016, https://theconversation.com/globalization-and-its-discontents-why-theres-a-backlash-and-how-it-needs-to-change-68800.
[12] See Megan Cassella and Kevin Breuninger, “US Chamber of Commerce asks Trump for Tariff Exclusions to ‘Stave off a Recession’,” CNBC, May 1, 2025, https://www.cnbc.com/2025/05/01/trump-tariffs-recession-chamber-of-commerce.html.
[13] Robert E. Scott, “Estimates of jobs lost and economic harm done by steel and aluminum tariffs are wildly exaggerated,” March 21, 2018, Economic Policy Institute, https://www.epi.org/publication/estimates-of-jobs-lost-and-economic-harm-done-by-steel-and-aluminum-tariffs-are-wildly-exaggerated/#:~:text=The%20study%20claims%20that%20the,created%E2%80%9D%20(Timmons%202018).
[14] The US government data lumps Canada and the US together for purposes of these tabulations.
[15] “Tariff Costs for US-Assembled Vehicles Drop Under ‘Adjusted’ Policy,” Anderson Economic Group, May 1, 2025, https://www.andersoneconomicgroup.com/tariffs-economic-impact-on-auto-industry/.
[16] Grace Jidoun, “How Much Do Grocery Stores Make? (Average Grocery Store Revenue Data 2025),” Toast, 2025, https://pos.toasttab.com/blog/on-the-line/how-much-do-grocery-stores-make?.
[17] “Information Technology Agreement,” World Trade Organization, undated, https://www.wto.org/english/tratop_e/inftec_e/inftec_e.htm.
[18] USMCA appendix 4-B-1, Product-Specific Rules of Origin, Appendix, https://ustr.gov/sites/default/files/files/agreements/FTA/USMCA/Text/04-Rules-of-Origin.pdf.
[19] Christopher Reynolds, “Canada’s exporters rush to be CUSMA-compliant, but how hard is it?, Global News, April 7, 2025,, https://globalnews.ca/news/11119813/canada-exports-cusma-compliance-us-tariffs/#:~:text=While%20the%20White%20House%20estimates,certify%20their%20wares%20until%20now. This article notes: “To be exempted, an importer must make a customs declaration that their goods meet certain rules of origin — often requiring that between 50 and 75 per cent is made on this continent — with documents such as a commercial invoice to certify compliance.”
[20] US Customs and Border Protection (CBP), “Official CBP Statement on Tariffs,” news release, March 8, 2025, https://www.cbp.gov/newsroom/announcements/official-cbp-statement-tariffs.
[21] The White House, “Amendments to Adjusting Imports of Automobiles and Automobile Parts Into the United States,” presidential proclamation, April 29, 2025, https://www.whitehouse.gov/presidential-actions/2025/04/amendments-to-adjusting-imports-of-automobiles-and-automobile-parts-into-the-united-states/.
[22] CBP, “CSMS#13145 - Guidance: Import Duties on Certain Auto Parts,” May 1, 2025, https://content.govdelivery.com/accounts/USDHSCBP/bulletins/3de7ef9; Sandler, Travis & Rosenberg, “More Details on Tariffs on Cars, Trucks, and Auto Parts,” trade report, April 8, 2025, https://www.strtrade.com/trade-news-resources/str-trade-report/trade-report/april/more-details-on-tariffs-on-cars-trucks-and-auto-parts.
[23] The White House, “Adjusting Imports of Steel into the United States,” presidential proclamation, February 10, 2025, https://www.whitehouse.gov/presidential-actions/2025/02/adjusting-imports-of-steel-into-the-united-states/.
[24] Ana Swanson and Alan Rappeport, “Trump Steel Tariffs Expanded to Hit Home Appliances,” June 12, 2025, New York Times, https://www.nytimes.com/2025/06/12/us/politics/trump-tariffs-steel-home-appliances.html.
[25] Auzinea Bacon, “Smartphones and Computers Are Now Exempt from Trump’s Latest Tariffs,” CNN Business, April 12, 2025, https://www.cnn.com/2025/04/12/tech/trump-electronics-china-tariffs.
[26] Lisa O’Carroll and Dominic Rushe, above; See also White House Fact Sheet, May 12, 2025.
[27] Farah Master and Casey Hall, “US Slashes ‘De Minimis’ Tariff on Small China Parcels to 54%,” Reuters, May 13, 2025, https://www.reuters.com/world/china/us-cut-de-minimis-tariff-china-shipments-54-120-2025-05-13/. Most such packages have the option of paying either 54% or a flat $100.
[28] “Fact Sheet: US-UK Reach Historic Trade Deal,” The White House, May 8, 2025, https://www.whitehouse.gov/fact-sheets/2025/05/fact-sheet-u-s-uk-reach-historic-trade-deal/; “Implementing the General Terms of the United States of America-United Kingdom Economic Prosperity Deal,” June 16, 2025, Executive Order, https://www.whitehouse.gov/presidential-actions/2025/06/implementing-the-general-terms-of-the-united-states-of-america-united-kingdom-economic-prosperity-deal/.
[29] CBP, “Official CBP Statement - Liberation Day,” news release, April 8, 2025, https://www.cbp.gov/newsroom/announcements/official-cbp-statement-liberation-day#:~:text=a%2010%25%20tariff%20on%20all,at%2012%3A01%20a.m.%20EDT.
[30] Aimee Picchi, “See the Full List of Reciprocal Tariffs by Country from Trump’s ‘Liberation Day’ Chart,” CBS News, April 9, 2025, https://www.cbsnews.com/news/trump-reciprocal-tariffs-liberation-day-list/.
[31] Jeff Mason, Kanishka and Andrea Shalal, “Trump says EU not offering fair trade deal, Japan being 'tough' too,” June 17, 2025, Reuters, https://www.reuters.com/world/china/trump-says-eu-not-offering-fair-trade-deal-japan-being-tough-too-2025-06-17/.
[32] Arendse Huld, “Trump Raises Tariffs on China to 145% – Overview and Trade Implications,” China Briefing, April 11, 2025, https://www.china-briefing.com/news/trump-raises-tariffs-on-china-to-125-overview-and-trade-implications/.
[33] “The Impact of Tariffs on Restaurants and C-Stores In 2025,” Paytronix (blog), April 14, 2025, https://www.paytronix.com/blog/impact-of-tariffs.
[34] “The Probability of a Recession Has Fallen to 40%, “ May 27, 2025, J.P. Morgan, https://www.jpmorgan.com/insights/global-research/economy/recession-probability.
[35] Cassella and Breuninger.
[36] Dan Dupont, “Citing tariffs, industry groups warn of pandemic-level supply chain crisis,” June 18, 2025, World Trade Online, https://insidetrade.com/daily-news/citing-tariffs-industry-groups-warn-pandemic-level-supply-chain-crisis.
[37] Joseph Parilla and Alan Berube, “Why the US-Mexico High Level Economic Dialogue Should Engage Sub-National Leaders,” Brookings, September 20, 2013, https://www.brookings.edu/articles/why-the-u-s-mexico-high-level-economic-dialogue-should-engage-sub-national-leaders/.
[38]Kamaron McNair, “Nearly Half of Americans Say They Live Paycheck to Paycheck,” CNBC, November 19, 2024, https://www.cnbc.com/2024/11/19/bank-of-america-nearly-half-of-americans-live-paycheck-to-paycheck.html.
[39] International Trade Administration, “Mexico Country Commercial Guide – Automotive Industry,” November 4, 2023, https://www.trade.gov/country-commercial-guides/mexico-automotive-industry#:~:text=The%20automotive%20sector%20is%20one,over%20one%20million%20people%20nationwide.
[40] Nicholas Takahaski, “Honda to Shift Production of Civic From Japan to US on Tariffs,” Bloomberg, April 16, 2025, https://www.bloomberg.com/news/articles/2025-04-16/honda-to-shift-production-of-civic-from-japan-to-us-on-tariffs.
[41] Kalea Hall, “Exclusive: GM to Increase Truck Production in Indiana following Trump's Tariffs,” Reuters, April 3, 2025, https://www.reuters.com/business/autos-transportation/gm-increase-us-truck-production-following-trumps-tariffs-2025-04-03/.
[42] MND Staff, “Preliminary 2024 Numbers Put Mexico FDI at Nearly US $37B,” Mexico News Daily, February 26, 2025, https://mexiconewsdaily.com/news/fdi-mexico-2024/#:~:text=Bank%20of%20Mexico%20data%20shows,just%20over%2013%25%20in%202023.
[43] David L. Goldwyn and César Emiliano Hernández Ochoa, “Mexico’s New Electricity Law Could Boost the Country’s Energy Sector. But Big Questions Remain,” Atlantic Council, March 11, 2025, https://www.atlanticcouncil.org/blogs/new-atlanticist/mexicos-new-electricity-law-could-boost-the-countrys-energy-sector/.
[44] Unifor Auto Talks, “Quick Facts on Canada’s Auto Industry,” 2022,” https://autotalks.uniforautohub.ca/quick_facts#:~:text=Jobs%20and%20the%20Economy,more%20than%2071%2C000%20in%20parts.
[45] Nathan Janzen, “How US Steel and Aluminum Tariffs Would Impact Canada’s Economy,” RBC Capital Markets, February 11, 2025, https://www.rbccm.com/en/story/story.page?dcr=templatedata/article/story/data/2025/02/how-us-steel-and-aluminum-tariffs-would-impact-canadas-economy.
[46] USMCA, article 1.1; Chapter 4, including the automotive annex; HTSUS, January 1, 2025, International Trade Commission, available at https://hts.usitc.gov/; see “U.S. Supreme Court Denies Petition Challenging Section 232 Steel Tariffs,” March 29, 2023, Smartrade, https://www.thompsonhinesmartrade.com/2023/03/u-s-supreme-court-denies-petition-challenging-section-232-steel-tariffs/#:~:text=On%20March%2027%2C%202023%2C%20the,trade%20policy%2C%20remedies%20and%20enforcement.
[47] See “Supreme Court declines to hear another Section 232 challenge,” November 1, 2023, World Trade Online, https://insidetrade.com/trade/supreme-court-declines-hear-another-section-232-challenge; U.S. Supreme Court Order List, October 30, 2023, denial of certiorari, 23-69, Prime Source Building Products v. United States, https://www.supremecourt.gov/orders/courtorders/103023zor_mkhn.pdf.
[48] IEEPA, Title II of Pub. L. 95–223, 91 Stat. 1626, enacted December 28, 1977; see “Court of International Trade Rules IEEPA Tariffs are Unlawful- Update,” June 4, 2025, JAS, https://www.jas.com/usa-compliance-blog/court-of-international-trade-rules-ieepa-tariffs-are-unlawful-update#:~:text=The%20Court%20of%20International%20Trade,Circuit%20which%20has%20ben%20approved.
[49] James E. Ransdell, “Federal Circuit Grants Stay, Expedites IEEPA Tariff Appeal,” June 11, 2025, CLK Cassidy Levy Kent,
https://www.cassidylevy.com/news/federal-circuit-grants-stay-expedites-ieepa-tariff-appeal/.
[50] Margaret Spiegelman, “Trump: ‘Transitional’ USMCA May No Longer Be ‘Necessary’,” World Trade Online, May 6, 2025, https://insidetrade.com/daily-news/trump-transitional-usmca-may-no-longer-be-necessary.
[51] David Ljunggren and Steve Holland, “Carney Stresses Canada Will Never Be for Sale in First Meeting with Trump,” Reuters, May 6, 2025, https://www.reuters.com/world/us/carney-meets-trump-bid-reset-strained-canada-us-relations-2025-05-06/.
[52] Chad de Guzman, “What to Know About Alberta’s Potential Separation From Canada,” TIME, May 6, 2025, https://time.com/7283108/alberta-canada-separatism-referendum-conservative-province-liberal-government-smith-carney/.
[53] Jeff Cox, “Bessent Sees Tariff Agreement as Progress in ‘Strategic’ Decoupling With China,” CNBC, May 12, 2025, https://www.cnbc.com/2025/05/12/bessent-sees-tariff-agreement-as-progress-in-strategic-decoupling-with-china.html.
[54] Brenda Estefan, “Latin America’s China Ties Won’t Be Easily Severed,” America’s Quarterly, February 24, 2025, https://www.americasquarterly.org/article/latin-americas-china-ties-wont-be-easily-severed/.
[55] Bureau of Economic Analysis, “International Services Trade (Expanded Detail), October 8, 2024, https://www.bea.gov/data/intl-trade-investment/international-services-expanded. This page indicates that in 2023, US services exports were $1026.6 billion, while imports were only $748.2 billion.
