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During his campaign and since being confirmed as the President-Elect, Donald Trump has been vocal about imposing various new tariffs. At the moment, these are simply unofficial proposals. However, once he has been sworn in as the next president, that can quickly change.
Key Takeaways:
Today we’re going to focus on what we already know about Trump’s tariff policy and what importers can do in anticipation of the changes.
Increasing tariffs on U.S. imports was one of Trump's main platforms during the presidential campaign. At that time, he claimed he would impose up to a 60% tariff on imports from China and 10% tariffs on imports from other nations, primarily the EU.
Now, with Trump set to take office in less than two months, he has provided further details on what he plans to enact starting day one, January 20.
On November 25, 2024, Trump posted his proposed tariff plan for Mexico and Canada to his social media site, Truth Social. Among other things it states: “I will sign all necessary documents to charge Mexico and Canada a 25% tariff on all products coming into the United States, [...].”
In a separate post that same day, he addressed plans for China, stating the following: “[...] we will be charging China an additional 10% tariff, above any additional tariffs, on all of their many products coming into the United States of America.”
For those involved in international trade, managing tariffs is nothing new. Tariffs have been imposed on various Chinese products since Trump enacted Section 301 Tariffs against that nation during his last term in office in 2018.
However, the USMCA trade agreement, of which Mexico and Canada make up two thirds, has allowed duty-free trade among the three nations for several years for a wide variety of products and raw materials. The imposition of a tariff here could have wide-reaching consequences.
Let’s take a closer look into each of these situations.
In September 2024, the Biden administration confirmed that section 301 tariffs on various Chinese products would continue. New tariffs and an increase of several existing tariffs also went into effect.
While some businesses have gotten a break through the use of the tariff exclusion process, their availability has significantly decreased.
An additional 10% tariff (on top of existing tariffs) could drive the import price of products past the point of profitability with current pricing. That leaves businesses with three possible solutions:
With trade relations between the two nations already tense, it may also be the final straw for certain companies to move production and sourcing out of China entirely. Importers able to benefit from a current tariff exclusion (likely because the product simply can’t be reliably sourced outside of China) will have far fewer choices.
Supply chain disruptions as new sources are confirmed and set up are also a strong possibility.
Related: How to Calculate Import Duties and Taxes From China to the US
Since 2023, Mexico has enjoyed the benefits of being the USA’s number one trade partner. Businesses on both sides of the border have benefited from the nearly free trade policies.
A 25% tariff on incoming products would be in direct contradiction to the USMCA. However, there are several other questions we’re still left with.
It’s impossible to truly predict how businesses, not to mention the Mexican government, would respond. However, trade in the following industries would likely feel the greatest impact:
The steel industry has already faced some of these issues. Section 232 tariffs on steel and aluminum were recently raised in response to abundant amounts of foreign materials from countries (such as China) exporting to Mexico in an attempt to bypass heavy anti-dumping duties imposed elsewhere.
Related: Import Costs From Mexico
Like Mexico, Canada has benefited from USMCA provisions that allow it to trade freely with its southern neighbors.
While not the manufacturing powerhouse that Mexico is becoming, Canada exports abundant amounts of oil to both nations. After expanding its pipeline, the U.S. on average imports 4 million barrels of crude oil per day, with most traveling to domestic refineries.
In terms of commodities, Canada is also a top source of lumber, meat, grains, and electronics. Since both countries share similar production, quality standards, and a common language, trade in these and most other commodities is often simpler. The extensive land border also tended to make shipping less expensive.
An additional 25% tariff doesn’t remove those benefits, but it also makes them far less profitable. While the USD is stronger than the Canadian Dollar, it’s hardly a built-in profit margin when compared to Mexican Pesos (as an example). Not to mention, labor costs in Canada are similar to that of the U.S., so manufactured imports also takes a hit.
Related: How Much Does it Cost to Import Goods From Canada?
As we mentioned at the start, these tariff proposals are just that: proposals. Until President-Elect Trump is officially in office, nothing can happen. Of course, that doesn’t mean you shouldn’t prepare for it.
We suggest taking time to do the following:
No matter what happens with Trump’s tariff policy changes, your business will benefit from your active interest and beneficial partnerships with trade professionals.
At USA Customs Clearance, we want to see your import business ventures succeed. We’ll be following these potential tariff changes ourselves, and our export customs agents are staying informed so they’re ready to help when you need it.
Have more questions? Schedule a 1-on-1 consultation with one of our customs experts and get the answers you’re looking for.
Call us directly at (855) 912-0406 to get started, or send us a direct mention through our online contact form.
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