Canada and Mexico, Early Trump Targets, Dodge The Worst of New Tariff Salvo

Canada and Mexico escaped President Donald Trump’s new round of tariff announcements, a relief for businesses and investors in the two biggest US trading partners.

Author of the article:

Bloomberg News

Thomas Seal

Published Apr 02, 2025  •  Last updated 0 minutes ago  •  4 minute read

fx(fvd5c]8v[ja40ao1se61h_media_dl_1.png US Department of Commerce

(Bloomberg) — Canada and Mexico escaped President Donald Trump’s new round of tariff announcements, a relief for businesses and investors in the two biggest US trading partners. 

Article content

Article content

The currencies of both countries rebounded late Wednesday from their lows after Trump left them off the list of nations that will be hit with “reciprocal tariffs” of at least 10% for what he deems unfair trade relationships. 

Article content

But other levies Trump has already imposed on Canadian and Mexican goods remain intact, and new ones that touch the automotive sector come into force on Thursday. Canadian Prime Minister Mark Carney told reporters in Ottawa: “We are going to fight these tariffs with counter-measures. We are going to protect our workers.” Mexican President Claudia Sheinbaum will speak about Mexico’s response during her daily news conference on Thursday.

Trump has used other tariffs to push Canada and Mexico to improve what he calls insufficient border security and lax enforcement against fentanyl trafficking. But the fact that each nation avoided a reciprocal tariff despite their trade surpluses with the US was seen as a win, and possibly a way to avoid further escalation of a trade conflict in North America.

“I’m cautiously optimistic that I never saw Canada or Mexico on that list,” Doug Ford, premier of the Canadian province of Ontario, told Bloomberg Television after Trump’s remarks. As long as goods under the region’s free-trade pact remain exempt from US import taxes, “I would highly recommend to the prime minister not to retaliate,” he said.

Article content

Article content

The Canadian dollar jumped to C$1.424 per US dollar in Wednesday evening trading New York time, The peso rebounded to as high as 20.15 from as low as 20.51.  

“When deciding where to invest, the parameter is always relative,” said Antonio Ortiz Mena, chief executive officer of business consultancy AOM Advisors in Washington. “From this perspective, Mexico and Canada came out of this process well.”

In previous executive orders, Trump imposed broad tariffs on Canada and Mexico of 25%, with a 10% levy on Canadian energy and potash. But he made an important exception — imports that complied with the US-Mexico-Canada Agreement, the trade deal that Trump signed during his first term in office, would remain exempt. That created a path for many businesses to continue to send goods to the US tariff-free.

If those past emergency orders citing border security are withdrawn, Canada and Mexico will face 12% reciprocal tariffs on non-USMCA-compliant goods, the White House said in a fact sheet published Wednesday. That’s still lower than many other countries and regions hit on Wednesday — with China facing 54%, for example.

Article content

“Should producers in both countries move to make more of their goods USMCA-compliant and the governments work towards resolutions for border frictions, there is scope for Canada and Mexico to take market share from other US trading partners,” Royce Mendes, macro strategist at Canadian financial group Desjardins, wrote in a note to clients.

To be sure, the countries face other punishing trade barriers from the US. A global 25% tariff on steel and aluminum has already been imposed, and a 25% tariff on automobiles is set for 12:01 a.m. New York time on Thursday. Both are large categories of goods to cross the US northern and southern borders. In a month, auto parts are poised to be hit with tariffs, striking deeper into the highly integrated continental supply chain. 

“They are making it up on the fly,” Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association, wrote in a post on X. “They will sink the US auto sector while aiming at Canada and the world.” 

There there is another mitigating factor — the US will take into account the value of American-made parts in vehicles when calculating the tariff. Since autos made in Canada and Mexico tend to include US parts, that means many cars and trucks won’t receive a full 25% levy.

Article content

What’s Next

Canada has already rolled out C$60 billion ($42.1 billion) in retaliatory tariffs on the US in response to Trump’s import taxes so far, and it has threatened tariffs against another C$95 billion if necessary. It’s not clear that Carney will want to go that far. He said he would outline his government’s response after he meets with Canada’s provincial leaders on Thursday.

Sheinbaum, on the other hand, has chosen not to retaliate yet, instead favoring negotiation with Washington. Mexican exports to the US totaled $513 billion in 2024, according to the central bank, an amount that accounted for 83% of total exports and 28% of GDP, Bloomberg Economics estimates.

For firms sending avocados and limes from Mexico, “there’s a sigh of relief, because we’re talking about a business that has very low margins,” said Tiffany Compres, partner and co-chair of international disputes at law firm Pierson Ferdinand LLP. “But there’s still a lot of anxiety and this is just kicking the can down the road.”

While countries elsewhere in the Americas were affected by the reciprocal tariffs, all of the major economies in the region received the baseline 10% levy. That puts the countries in better competitive position compared much of Asia and Europe. 

Article content

“Colombia won’t be more affected by this measure than other countries in the region,” the country’s foreign ministry said. Brazilian lawmakers rushed legislation allowing the government to retaliate without first seeking arbitration in the World Trade Organization, while its foreign affairs ministry said the country remains in talks with the US. Brazilian government officials, speaking on condition they not be identified, expressed cautious optimism about negotiations with US counterparts.

“The world is waking up today to a reality that Canada has been living with for months,” said Candace Laing, president of the Canadian Chamber of Commerce. She said she hopes Canada and the US are now on “a path to real negotiation, ultimately leading to long-term partnership.”

—With assistance from Josh Wingrove, Amy Stillman, Maya Averbuch, Randy Thanthong-Knight, Melissa Shin, Erik Hertzberg, Laura Dhillon Kane, Walter Brandimarte and Simone Iglesias.

Article content