Will Trump’s Trade Tariffs On Canada, Mexico, And China Hurt American Businesses And Global Markets? Here's What Analysts Say

US President Donald Trump’s sweeping tariffs — 25 per cent on imports from Canada and Mexico, along with an additional 10 per cent on Chinese goods — are set to disrupt global supply chains and drive up costs for key industries, analysts warn, as reported by The Hindu.

The move targets automobiles, electronics, energy, and agriculture, raising concerns over inflation, trade relations, and potential economic slowdowns in North America.

Major Impact on North American Trade

With US imports from Canada and Mexico valued at nearly $900 billion in 2023, Trump’s tariffs could severely impact businesses that operate across multiple borders.

The automobile and electronics sectors are expected to take the hardest hit, as parts and materials frequently cross national borders before final assembly.

For Canada, where 80 per cent of exports go to the US, the tariffs pose significant risks. The auto and energy sectors, which make up over 40 per cent of Canada's exports, will bear the brunt of the new trade restrictions. Crude oil, bitumen, and natural gas exports will now face a 10 per cent tariff, an increase from previous exemptions.

Ontario, the country’s largest automobile manufacturing hub, is particularly vulnerable, with supply chains dependent on seamless cross-border trade.

Meanwhile, Mexico, whose exports to the US account for 84 per cent of its total exports, faces major challenges. The auto, electronics, and machinery industries, which send nearly half their output to the US, will likely see significant cost increases.

Food imports, particularly fruits, vegetables, and nuts, are also at risk, with Mexico supplying 63 per cent of US vegetable imports and nearly half of its fruit and nut imports in 2023. With over 80 per cent of US avocados sourced from Mexico, higher tariffs could lead to a rise in food prices, affecting everyday products like guacamole.

Tariffs Could Violate USMCA Trade Agreement

Trump justified the tariffs under emergency economic powers, arguing that Canada, Mexico, and China have not done enough to curb illegal immigration and drug trafficking.

Economists warn that these tariffs, along with potential retaliatory measures, could push Canada and Mexico toward recession while also increasing the risk of a mild economic downturn in the US.

EY chief economist Gregory Daco stated, ‘The tariffs send a clear message, reinforcing Trump’s America First stance and using trade as a geopolitical tool,’ as quoted by The Hindu. Investors are already bracing for inflationary pressures and supply chain disruptions.

Retaliation from Mexico, Canada, and China

Mexican President Claudia Sheinbaum has announced retaliatory tariffs on US goods, while Canadian Premier David Eby urged residents to boycott US liquor brands, even removing American alcohol from government store shelves in response.

China, while less affected economically, sees the tariffs as a hostile move. The Chinese Ministry of Foreign Affairs stated that the government “firmly deplores and opposes this move and will take necessary countermeasures.”

The Ministry of Commerce also announced plans to file a lawsuit with the World Trade Organization (WTO) and take further steps to protect China’s trade interests.

Rising Global Trade Uncertainty

With Mexico and Canada considering legal action under USMCA, and China preparing countermeasures, concerns are growing over a prolonged trade conflict. Analysts warn that Trump’s tariffs could be the beginning of a new, drawn-out trade war, particularly with Beijing.

As markets react to the heightened uncertainty, businesses across multiple sectors are preparing for higher costs, disrupted supply chains, and potential economic fallout — setting the stage for another turbulent phase in global trade relations.