Trade Tensions: Trump's Tariffs on Hold for a Month

This past weekend, US President Donald Trump introduced tariffs on imports from Mexico and Canada. However, shortly after discussions with President Claudia Sheinbaum, the US government decided to place these tariffs on hold for one month to allow for negotiations. 

On Feb. 1, Trump confirmed the imposition of a 25% tariff on imports from Mexico and Canada (with an additional 10% on Canadian energy) and a 10% tariff on Chinese imports. Citing the International Emergency Economic Powers Act (IEEPA), Trump stated that these measures are necessary to protect American citizens from illegal immigration and deadly substances like fentanyl.

The reaction from Mexico and Canada was immediate. Sheinbaum expressed on Feb. 2 that Mexico does not seek confrontation but instead proposes a collaborative approach through a working group to address security and public health issues while respecting national sovereignty. She emphasized that Mexico not only wants to prevent fentanyl from reaching the United States but also aims to eradicate its presence nationally.

Sheinbaum also categorically rejected the accusations from the White House linking the Mexican government to criminal organizations, asserting that the real source of arms trafficking lies within the United States. She presented data from the Bureau of Alcohol, Tobacco, Firearms, and Explosives that highlighted that 74% of the firearms used by organized crime in Mexico are illegally sourced from the United States.

Then she added that she instructed the Mexican Minister of Economy, Marcelo Ebrard, to implement Plan B “that we have been working on, which includes tariff and non-tariff measures in defense of Mexico’s interests,” she wrote on X.

On Feb. 3, following the conversation with Trump, Sheinbaum announced that the implementation of the tariffs would be paused for a month to facilitate negotiations with high-level officials from both countries. Trump indicated they had agreed to bolster border security with 10,000 Mexican soldiers specifically tasked with managing the flow of fentanyl and migrants.

Impact on the Trucking Industry

The trucking industry in all three countries faces a looming crisis as a result of these new tariffs. According to data from the IRU, road freight plays a critical role in North American trade. In 2023, trucks carried 66.5% of the value of surface trade between the United States and Canada and 84.5% between the United States and Mexico. Trade associations from the trucking sectors in both countries say that the proposed tariffs are excessive and could severely harm both economies.

The Canadian Trucking Alliance (CTA) and the American Trucking Associations (ATA) warn that tariffs not only increase operational costs, but also pose a considerable risk of crippling businesses within the already beleaguered trucking industry. The CTA highlights that prolonged tariffs could disrupt supply chains and generate higher prices for consumers, ultimately leading to downsizing and closures for numerous trucking companies.

Chris Spear, President and CEO, ATA, says that the trucking sector is just beginning to recover from a prolonged freight recession characterized by low volumes and rising operational costs. He says that a 25% tariff on Mexican imports could add as much as US$35,000 to the price of a new truck, creating a prohibitive financial barrier for many smaller carriers.

Mexico’s National Chamber of Cargo Transportation (CANACAR) also warns that new tariffs could disrupt trade and raise costs as the freight sector recovers. The chamber urges both governments to find solutions that maintain supply chain competitiveness, prevent price hikes, and protect businesses on both sides of the border.

The logistics sector sees potential tariff increases as both an economic and operational challenge, raising costs and disrupting trade flows. Juan Jesús Romero, CEO, MOSUR, warns of higher import costs and border delays, prompting companies to optimize routes, improve customs management, and diversify markets. Milton Magos, Vice President, TRAFFIX, says that rising fuel costs will impact rates, but adds that the tariffs could be part of a US strategy to bolster North American integration and reduce reliance on China, as reported by MBN.

Economic Projections and Trade Relationships

The Peterson Institute for International Economics warns that US tariffs would lower GDP and raise inflation across all involved countries. Predictions suggest that Canada could see a reduction in its economy by approximately 2.3%, while Mexico might experience a contraction of about 3.4%.

The repercussions would be particularly severe for highly integrated industries in the region, such as automotive and electronics, where any escalation in production costs could threaten competitiveness against other global markets. With 83% of Mexico's exports directed to the United States and 73% of Canada's exports following suit, both nations' economies are vulnerable to the ramifications of such protectionist measures.

Ecuador Tariffs Against Mexico

Ecuadorian President Daniel Noboa announced a 27% tariff on Mexican imports, emphasizing Ecuador’s commitment to trade integration but not at the expense of unfair practices. “We reaffirm our willingness to sign a Free Trade Agreement with Mexico, but until that becomes a reality, we will impose a 27% tariff on imported products to promote our industry and ensure fair treatment for our producers,” Noboa states on X.