Is the Trump Tariff Roller-Coaster Over, and if so, What Now?

In recent weeks, the conversation around tariffs has reached a peak. President Donald Trump announced sweeping reciprocal tariffs ranging from 20% to 46% on the United States' top trading partners, and an unprecedented 145% tariff on China. The market reacted sharply: just two days after the April 2 announcement, the S&P 500  index experienced a loss of over US$3 trillion in market value.

All reciprocal tariffs were reset to a flat 10% and temporarily suspended for 90 days to allow each country the opportunity to negotiate individual tariffs. Notably, Mexico and Canada were exempt from these measures from the outset.

The following table outlines our present situation:

For clarity, here are some key definitions of commonly used US trade tariffs:

A Reciprocal tariff is a trade duty imposed by the United States on imports from other countries in response to similar tariffs or trade barriers imposed on its exports. 

A Section 301 tariff is a trade duty imposed by the United States under Section 301 of the Trade Act of 1974, which allows the United States to take action, including tariffs, against foreign countries that engage in unfair trade practices, such as intellectual property theft, forced technology transfer, or discriminatory policies.

A Section 232 tariff is a trade duty imposed by the United States under Section 232 of the Trade Expansion Act of 1962, which allows the government to restrict imports that threaten national security, including those affecting critical industries like steel, aluminum, and defense-related materials.

An IEEPA tariff is a trade duty imposed under the International Emergency Economic Powers Act (IEEPA) of 1977, which grants the US president broad authority to regulate commerce during a national emergency related to foreign threats, including imposing tariffs, financial sanctions, or export controls to protect national security.

An analysis of the chart clearly indicates that China is the primary target of most US tariff measures. Currently, China faces a 20% IEEPA tariff with no exceptions, a 10% reciprocal tariff — also without exceptions — temporarily paused for 90 days as of May 14, 2025, and Section 301 tariffs ranging from 7.5% to 25%, with the 25% rate applying to approximately two-thirds of US-China trade. In addition, China is subject to Section 232 25% tariffs, which affect imports of steel, aluminum (including derivatives), automobiles, and auto parts, similar to many other countries.

Mexico, by contrast, is subject to a 25% IEEPA tariff, though exports compliant with USMCA — estimated to represent 85% to 90% of total exports — are exempt, resulting in a relatively low overall impact.

Mexico is also affected by the 25% Section 232 tariff on autos and auto parts. This is particularly significant given that the automotive industry is Mexico’s largest, most advanced, and oldest manufacturing industry, contributing approximately 5% to the country’s GDP. According to the Mexican Auto Parts Industry Association, around 40% of the content in vehicles manufactured in Mexico is sourced from the United States. As a result, the actual net impact of this 25% tariff is estimated at 15% on autos exported to the United States. Auto parts, however, as long as they are USMCA-compliant are exempted.

Finally, Mexico is also subject to Section 232 25% tariffs on steel, aluminum, and their derivatives. However, Mexico maintains a strategic advantage over other countries due to its low-cost manufacturing base and geographic proximity to the United States, which enables the production of metal and aluminum components using US-sourced steel and aluminum, thus partially offsetting the impact of the tariff.

Stepping back to assess the broader picture, as of now, Mexico holds a 30% tariff advantage over China compared to its position on Jan. 1, 2025. This is a substantial margin that significantly shifts the cost-benefit equation in Mexico’s favor.

To put this into perspective, the 25% tariffs imposed on China in 2018, combined with the disruptions of the COVID-19 pandemic, were key variables that accelerated the initial wave of nearshoring to Mexico. If the current tariff structure remains unchanged, this additional 30% differential, coupled with the recent surge in geopolitical and economic uncertainty, is prompting companies to place even greater emphasis on supply chain reliability and resilience.

In my view, this current situation is setting the stage for a second wave of nearshoring momentum into Mexico, potentially larger and more strategically focused than the first.

There is, however, an important caveat: Trump’s core objective is to bring manufacturing back to the United States. For this to happen, certain conditions must be met:

1. Manufacturing operations that can be heavily automated.

2. Mature domestic supply chains – Industries with well-established upstream supply networks, such as steel and aluminum. Sectors like textiles, which rely heavily on fragmented global inputs, are unlikely to be prioritized.

3. Strategic industries eligible for targeted incentives – Sectors deemed critical to national security or economic competitiveness, including semiconductors, advanced electronics, pharmaceuticals, rare earth minerals, defense, and shipbuilding, may receive significant support through subsidies or regulatory advantages, or face penalties if production remains abroad.

We expect to find out in early June, at the end of the 90-day pause, what the final decision will be regarding tariffs on Mexico and Canada, particularly the 25% duties on autos, auto parts, steel, aluminum, and their derivatives. Based on the terms of the recent trade agreement reached with the United Kingdom, there is reason for optimism. 

By mid-August 2025, we should know the final outcome of trade tariffs with China. Frankly, I was surprised to see Trump reduce the reciprocal tariff from 145% to just 10%. I would have expected a more gradual approach, perhaps a drop to 80% as a negotiation tactic, aiming to settle around 60% (his campaign promise).

This sharp reduction suggests one of two things: either the United States is securing a highly favorable deal from China, or the negotiations have escalated, hard to say.

In the meantime, companies cannot afford to remain passive. They should be actively preparing for multiple scenarios — at minimum, a best-case and a worst-case plan.

What if Trump raises reciprocal tariffs on China back to 60% or even 80%? In my view, this would represent a worst-case scenario for many global supply chains.

What if he maintains reciprocal tariffs at current levels but eliminates all Section 232 tariffs (on steel, aluminum, autos, and auto parts) across all countries?

What if he keeps reciprocal tariffs steady but removes Section 232 tariffs specifically for Mexico and Canada, while maintaining them for the rest of the world?

Each of these scenarios — or some combination of them — is entirely possible.

The bad news? There’s still no definitive clarity, and CEOs will need to exercise patience for a little longer.

The good news? Markets have stabilized, a clear signal of renewed business confidence. But we must remain cautious — let’s hope this isn’t just the calm before the storm.

So, what’s next? For now, the best course of action is to wait just a little longer, but not passively. Strategic patience must be paired with active preparation.

Let’s not forget: the world has already changed. While profits — and China as a key engine of those profits — remain high on the priority list, reliability and resilience have moved closer to the top than ever before.

Strategic recommendations for manufacturers and retailers:

As we await final clarity on short-term global tariff developments, now is the time to focus on Resilience and Reliability through structured scenario planning. At the same time, explore automation opportunities — leveraging machines and advanced technologies to reduce exposure to labor and geopolitical risk.

Be ready with your PRRO Plan: Profits, Reliability, Resilience, and Options.

Above all, diversify. Don’t put all your eggs in one basket. Instead, determine how many baskets you need — and where they should be placed — to ensure operational flexibility and long-term competitiveness.