Despite Trump's pause, over half of Canadian & Mexican goods will face tariffs — here's how

Despite US President Donald Trump’s pause on tariffs on Canada and Mexico, most of the goods from these countries will continue to be tariffed.

Trump has not paused all tariffs but has exempted goods covered by US-Mexico-Canada Agreement (USMCA) from tariffs. Separately, he has paused tariffs on automobiles and spares from Mexico and Canada and has reduced tariff on Canadian potash, which is used in fertilisers, from 25 per cent to 10 per cent.

Despite such relaxations, most of the goods from Canada and Mexico continue to face tariffs.

Bloomberg has reported a White House official as saying that, as per last year’s data, 38 per cent of goods from Canada and 49 per cent of goods from Mexico are covered under USMCA’s tariff exemption. This means that 62 per cent of Canadian imports and 51 per cent of Mexican imports are still subjected to tariffs.

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However, there is scope for more relaxation for Mexico — but none for Canada.

Bloomberg has noted that 41 per cent of goods fall into a gray area as these goods qualify for the so-called ‘most-favored nation’ rate that is lower than tariffs.

Such complications, the tariffs-induced increased costs, and the uncertainty from Trump's flip-flops around the timeline , have led to a downfall in markets. The S&P 500 fell 1.8 per cent on Thursday, taking the weekly fall to 3.6 per cent, which is the lowest since the US banking crisis two years ago.

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Moreover, the exemptions under USMCA are not permanent. These exemptions will expire on April 2.

The next tranche of Trump’s tariffs, 25 per cent tariffs on steel and aluminium , are going to effect on March 12.

Canada is set to be the biggest sufferer of Trump’s tariffs as the majority of Canadian goods —62 per cent— are still tariffed despite USMCA exemptions and tariffs on metals will hit Canada hardest as it is largest exporter of steel and aluminium to the United States.