How will Trump Tariffs Affect Mexico, Canada & China?

When the Trump administration’s new tariffs came into effect on 1 February 2025, they marked more than just another round in US President Donald Trump's ongoing trade battles.
Targeting goods from Mexico, Canada and China, the measures are already reverberating far beyond the factories that produce these products, creating ripple effects throughout global supply chains.
Mexican and Canadian goods now face a steep 25% tariff, with Chinese imports and Canadian energy hit by a 10% levy. Unlike previous measures, these tariffs come with no exceptions—even for low-value Canadian imports under US$800, which were previously duty-free.
Invoking the International Emergency Economic Powers Act (IEEPA), President Trump justified the move by accusing these nations of failing to address illegal immigration and drug trafficking.
While these decisions have sparked immediate political backlash, the real battleground is the global supply chain, where businesses, workers and economies are scrambling to adjust.
Mexico’s response: Retaliation and resilience
Mexico didn’t waste time in hitting back. President Claudia Sheinbaum announced retaliatory tariffs on US goods, stating her government preferred dialogue but was "compelled to respond in kind."
Dismissing US claims of Mexican government ties to drug cartels as “slander,” Sheinbaum authorised a range of tariff and non-tariff measures to defend Mexico’s interests.
Though specific US goods targeted remain unspecified, insiders suggest tariffs ranging from 5% to 20% will hit pork, cheese, fresh produce, steel and aluminium. The auto industry, which is deeply entwined with US supply chains, may initially be exempt, reflecting the sector’s critical role on both sides of the border.
The impact is profound. In 2023, US exports to Mexico totalled more than US$322bn, while imports from Mexico exceeded US$475bn. These figures highlight the scale of disruption tariffs could cause, particularly for industries like automotive, energy and agriculture.
Jorge Gonzalez Henrichsen, Co-CEO of The Nearshore Company, remains cautiously optimistic: "There is little to gain from tariffs, as neither American companies nor consumers would benefit... I am confident that decision-makers in Washington understand this reality."
Yet, the agricultural sector tells a different story. Mexico supplies 63% of US vegetable imports and 47% of fruit and nuts.
With US agriculture already strained by labour shortages following immigration crackdowns, tariffs could drive food prices even higher. Products such as avocados, already in high demand, may become luxury items for many Americans.
Canada’s countermeasures: Economic pressure points
Canada, the largest export market for US goods, swiftly retaliated with tariffs of up to 25% on US$155bn worth of US products.
Prime Minister Justin Trudeau’s response targeted not only symbolic goods like bourbon and orange juice from Trump’s home state but also essentials like sports equipment, appliances and clothing.
In 2023, daily cross-border trade between the US and Canada amounted to $2.7bn. Canadian exports to the US represent nearly 18% of Canada’s GDP, supporting more than 2.4 million jobs.
Trudeau didn’t mince words: “Tariffs against Canada will put your jobs at risk, potentially shutting down American auto assembly plants and other manufacturing facilities.”
Beyond tariffs, Canada is considering non-tariff measures, including restrictions on critical minerals and energy exports. This could hit the US hard. Canada supplies 60% of America’s crude oil imports, 99% of its natural gas and 90% of its electricity. Any disruption would send energy costs soaring, forcing US manufacturers to rethink production strategies.
As Trudeau warned: "They will raise costs for you, including food at the grocery store and gas at the pump." For supply chains, this means more than just higher prices—it signals instability that could force companies to diversify away from US-dependent operations.
China’s strategic response: A calculated move
China’s reaction to Trump’s tariffs has been measured but firm. While condemning the measures as violations of international trade rules, Beijing is pursuing a dual strategy: filing complaints with the World Trade Organization (WTO) and preparing unspecified countermeasures.
China’s Commerce Ministry urged the US to “engage in frank dialogue and strengthen cooperation,” reflecting a more diplomatic approach compared to past trade wars. However, the underlying message is clear—China is ready to retaliate if needed.
Interestingly, Chinese industries are better prepared this time. Lessons from Trump’s first-term tariffs have led many companies to diversify supply chains, shift production to other countries or even reduce reliance on the US market altogether.
The broader implication? A potential realignment of global manufacturing hubs, with companies looking to stabilise operations in less volatile regions.
Supply chains linked to Chinese technology, electronics and automotive sectors may face cost increases, but many firms are likely to absorb these by tapping into non-US markets.
This resilience is part of a broader strategy to strengthen China’s role in global trade, even as it navigates economic tensions with both the US and the EU.
Global supply chains at a crossroads
The Trump tariffs are not just about politics—they’re reshaping how goods move around the world.
Simon Geale, Executive Vice President of Procurement at Proxima, summed it up on LinkedIn: "Many businesses will have begun this work already, but the implementation of these tariffs adds new urgency."
He points to the need for companies to reassess supply chains, diversify suppliers and prepare for economic slowdowns. "If economies begin to slow down, what impact will that have on businesses?"
The unpredictability of US trade policy is now a key risk factor for global supply chains.
Companies are reconsidering their exposure to the US market, while countries like Mexico, Canada and China seek new partnerships to mitigate future shocks.
Explore the latest edition of Supply Chain Digital and be part of the conversation at our global conference series, Procurement & Supply Chain LIVE.
Discover all our upcoming events and secure your tickets today.
Supply Chain Digital is a BizClik brand.
- WEF: Supply Chains at Heart of Cybersecurity ThreatsTechnology
- Altana: What the Updated UFLPA List means for Supply ChainsSupply Chain Risk Management
- Senators Push for Stronger US Supply Chains with New BillSupply Chain Risk Management
- China's Export Ban: Supply Chain Challenges on the HorizonSustainability