As he did in his first term, President Trump has threatened to impose tariffs on US imports from various countries. In Mexico’s case, this threat has not been linked to migration or trade imbalances. Regarding the former, the US has increased deportations of illegal migrants and reinforced security at its southern border. As for the latter, both countries have a solid trade relationship as part of the United States-Mexico-Canada (USMCA) trade agreement.
Rather, Trump’s arguments have focused on drug trafficking. The Executive Order issued on 1 February imposed a tariff of 25% on all imported goods from Mexico on grounds of a national economic emergency. It alleged Mexican authorities failed to prevent drug trafficking organizations (DTOs) from transporting illicit drugs, or products to manufacture them, into the US. An identical Order was issued against Canada with the same allegations.
Following negotiations, a second Executive Order acknowledged the “immediate steps” taken by Mexico, delaying the imposition of these tariffs for one month, until 4 March 2025. Mexico agreed to deploy 10,000 National Guard agents to combat DTOs, particularly for the traffic of fentanyl. Canada’s Prime Minister took a similar measure. However, given the subjective nature of some of Trump’s arguments it is unclear what will be needed to satisfy his demands and avoid an escalation of trade tensions.
Tariffs as a negotiating tool
During his first term Trump introduced tariffs on imports of steel, aluminum, solar panels and specific goods from China and the EU. Some of these were maintained during the Biden administration. From the US perspective, tariffs have the advantage that they can be implemented by the President through an Executive Order, without the need for Congressional approval.
Mexico and Canada are highly dependent on trade, ranking among the top five by trade openness among G20 economies. The US is the least open economy among the G20. Exports to the US represented around 80% of Mexican goods exports in 2023, and 75% of Canada’s goods exports. Therefore, both countries have incentives to concede to some of Trump’s demands and maintain preferential access to the US market.
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