‘Trade means jobs:’ Trump tariffs on Canada and Mexico could hit close to home

The 25% tax that President Donald Trump plans to slap on imports from Canada and Mexico as soon as Saturday could drive up the price of everything from gasoline and pickup trucks, to Super Bowl party guacamole dip.

The tariffs would also invite retaliation. Doug Ford, the premier of Ontario, has already vowed to counterpunch by pulling American alcohol off store shelves in the Canadian province – no idle threat; Canada is the world’s No. 2 market for America’s distilled spirits (behind the 27-nation European Union).

Trump’s tariffs threaten to blow up the trade agreement he himself negotiated with America’s neighbors in his first term. His U.S.-Mexico-Canada Agreement – “the fairest, most balanced, and beneficial trade agreement we have ever signed into law,” Trump once declared — was supposed to bring predictability to North American trade, giving businesses the confidence to make investments.

But when it comes to the self-proclaimed “Tariff Man,” Trump and his passion for plastering taxes on foreign goods, nothing is predictable and nothing is ever really settled.

“Tariffs at those levels and at that scope would effectively destroy the agreement that Trump himself negotiated and always brags about,” Scott Lincicome, a trade analyst at the libertarian Cato Institute, said.

The president said the 25% levies are designed to pressure America’s two neighbors to do more to stop the flow of undocumented immigrants and fentanyl into the U.S.

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President of Washington Council on International Trade weighs in

However, President of the Washington Council on International Trade Lori Otto Punke told KIRO Newsradio Friday that for Washington “trade means jobs” and the tariffs are “potentially very consequential” as 40% of Washington jobs are tied to international trade.

“Mexico, Canada and China are some of our top trading partners, so there is a lot of concern about how these three countries might react to U.S. tariff policy and what we saw and what we’ve seen over the years, since the U.S. has had more aggressive tariffs in place than you know, in previous decades, is that really negatively impacts our ability to sell our goods and services abroad,” Otto Punke said.

She added that 95% of consumers are outside of the U.S. market.

“We’re really reliant on being able to sell Washington state’s goods and services outside of the U.S. and so that really helps benefit jobs here and what we know is that other countries will retaliate,” Otto Punke shared.

However, she is hopeful for a negotiated solution in the coming weeks but if not the consequences could be detrimental.

“I do have a lot of concerns that we’ll see a decrease in our ability to sell our goods and services abroad, which, again, will negatively impact our ability to sustain these jobs, which are really good, solid jobs here locally,” Otto Punke said.

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Analysts believe tariffs are threat to USMCA

Michael Robinet of S&P Global Mobility and many other analysts suspect the tariff threat is also designed to get Canada and Mexico to go along with America’s demands for changes to the United States-Mexico-Canada Agreement (USMCA) when it comes up for renewal next year.

Robinet, executive director of automotive consulting at S&P Global, said he doubts that Trump will go ahead with 25% across-the-board tariffs on Canadian and Mexican imports – what he calls a “shock-to-the-system” approach that would freeze the North American economy in a “Tariff Winter.” Instead, Robinet said, Trump might postpone or phase in the tariffs or initially exempt some industries to show Canada and Mexico how much worse things could get if he doesn’t get his way.

Trump pressured Mexico and Canada into agreeing to the USMCA five years ago, partly to narrow the United States’ big trade deficit – the gap between what the U.S. sells and what it buys.

It hasn’t worked out that way.

The U.S. deficit in the trade of goods of Mexico has widened from $106 billion in 2019 to $161 billion in 2023 (the last full year for which numbers are available). That is partly because Mexico has replaced China, locked in an ongoing trade war with the United States, as the source of many U.S. imports – furniture, textiles, shoes, laptops, computer servers.

The trade gap in goods with Canada has ballooned, too: From $31 billion in 2019 to $72 billion in 2023. The deficit largely reflects America’s imports of Canadian energy.

“The USMCA has not met the goals that Trump set forth for it. Our trade deficit with Canada and Mexico is bigger than it was, considerably,” said Lori Wallach, director of the Rethink Trade program at the American Economic Liberties Project and a longtime critic of America’s free trade pacts. “A lot of jobs have been offshored to Mexico since USMCA.”

When the USMCA comes up for renewal next year, the U.S. is expected to press for rules that would do more to encourage factories to produce in the U.S. And it could seek a crackdown on Chinese goods being sent through Mexico to the United States to evade tariffs that Trump and President Joe Biden imposed on Beijing.

The U.S. now does far more business – exports and imports alike – with both Canada and Mexico than it does with China. In 2023, U.S. trade of both goods and services with Canada and Mexico came to more than $1.8 trillion, compared with $643 billion with China. Because of USMCA – and the regional trade deal it replaced in 2020 – most products cross the region’s borders tariff-free.

The threatened 25% tariffs are causing heartburn in corporate boardrooms. If Trump goes ahead with his threat, tariffs would surge from $1.3 billion to $132 billion a year on Mexico’s imports to the United States and from $440 million to $107 billion on Canada’s, according to the tax and consulting firm PwC.

And no one knows if Trump will really pull the trigger or how long the tariffs would stay in place if he does.

“It’s really thrown industry into this turmoil of anxiety,” trade lawyer Chandri Navarro, senior counsel at Baker & McKenzie, said. “What industry likes is certainty. You’re making production decisions, supply chain decisions, purchasing decisions five years out.”

Trump views tariffs as a fix-it for most of what ails the economy. He said they raise money for cuts in income and corporate taxes, encourage companies to move production to the U.S. and offer useful leverage in pressuring other countries to make concessions on trade and other issues.