US threatens tariffs on Canada and Mexico, sparking trade crisis

The United States is threatening a significant shake-up in its trade relations with Canada and Mexico. President-Elect Trump has proposed imposing tariffs of up to 25 per cent on key imports.

A Reuters report highlights that it includes crude oil, automobiles, and agricultural goods. This move comes amid escalating disputes over border security and trade imbalances.

For Canada, the potential tariffs on crude oil could severely impact the nation’s economy, given that over 80 per cent of its oil exports are destined for the US.

Meanwhile, Mexico, which relies heavily on automobile and agricultural exports to its northern neighbour, could face severe economic repercussions.

Mexican president Claudia Sheinbaum during a press conference highlighted and I quote “to one tariff will come another and so on, until we put our common businesses at risk. For example, Mexico’s main exporters to the United States are General Motors, Stellantis and Ford Motor Company, which came to Mexico 80 years ago, why put a tax on them that puts them at risk? It is not acceptable and would cause the US and Mexico inflation and job losses.”

The proposed tariffs would have far-reaching consequences.

Canadian crude oil exports, valued at over $90 billion annually, are a key target.

For Mexico, auto exports worth nearly $55 billion and agricultural exports exceeding $25 billion annually face risks.

Analysts warn that such tariffs could raise prices for American consumers, disrupt supply chains, and create uncertainty for businesses.

Trade-dependent sectors, including manufacturing and agriculture, could see job losses and reduced investments in all three countries.

Experts are also raising concerns about the broader impact on North American economic growth, which relies heavily on smooth cross-border trade.

Steven Ricchiuto, Mizuho Securities USA, chief economist, comments and I quote, "Clearly, there's a lot of automobile-related activity that goes on between the United States, Mexico and the United States and Canada. That's why I was saying it depends on how that's done, what's carved out, what's not carved out in terms of the tariffs. So, again, until you see the actual details, it's hard to make an assessment as to where we're actually going with this.”

This latest tariff proposal also carries political ramifications. Both nations are major trading partners for the US, with combined annual trade exceeding $1.5 trillion. Economists caution that disrupting these ties could weaken the region’s global competitiveness.

Meanwhile, the us administration defends the move, citing the need to address longstanding trade imbalances and border security concerns. As negotiations continue, the stakes remain high for North America’s economic and diplomatic future.

(With inputs from Reuters)