Vipal Monga, Santiago Pérez, and José de Córdoba of The Wall Street Journal report that Mexico and Canada, reliant on free trade with the U.S., are struggling with President Trump’s 25% tariffs. These tariffs aim to bring jobs back to the U.S. and tighten border security but have taken both countries by surprise. They write:
Few countries have bet as heavily on free trade as Mexico and Canada. Now that President Trump’s 25% tariffs have hit both countries, their economies are facing a stress test that rivals the global financial crisis and the pandemic.
Canada and Mexico have separately signed more than a dozen treaties each—among the most in the world—that give them open access to the markets of more than 50 countries. The most important remains the U.S., Mexico, Canada Agreement, an updated version of the 1994 North American Free Trade Agreement that eliminated most barriers to trade between the three countries. More than 80% of both countries’ exports go to the U.S.
The deal turned Mexico into an export powerhouse, becoming one of the world’s top exporters of vehicles, beer and flat-screen TVs. Canada, for its part, used free trade deals with the U.S., which date to the 1960s, to help vault its now $2 trillion economy into the elite Group of Seven, or G-7. […]
For Trump, the tariffs are a means toward ending a period of losing jobs and manufacturing prowess to smaller neighbors. He has promised that new tariffs will provide a new revenue source for the government, cause companies to relocate their operations to the U.S. and force Mexico and Canada to firm up their border policies to stop migrant and drug flows across the border. […]
The bet that Canada made beginning in the 1960s that global trade would only increase with the U.S. as the central player, wasn’t a risky one until the sudden shift brought in by Trump, said John Boscariol, head of the international trade and investment law practice at law firm McCarthy Tetrault.
“It wasn’t outlandish to think we should preserve and encourage that relationship,” he said. “I don’t think anybody anticipated the shift would happen so quickly.”
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