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Mexico and Canada are spared from Trump's latest tariffs with Mexico's trade advantage including tariff-free exports of avocados, textiles, pharmaceuticals
Published : 04 Apr 2025, 08:16 AM
President Donald Trump's "Liberation Day" appeared set to end North American free trade and Mexico's privileged access to the US.
Instead, Mexican officials are celebrating being left off Trump's global tariffs list, with analysts suggesting the omission could prolong North American free trade.
On a day in which nearly all countries were hit with at least 10% tariffs, Mexico and Canada were the exceptions, potentially putting them in a position to benefit from the higher costs of other nations' goods, particularly in Asia.
At Mexican President Claudia Sheinbaum's press conference on Thursday, flanked by Economy Minister Marcelo Ebrard, the relief was palpable.
"Today, yes we have preferential treatment," Ebrard told reporters.
"The treaty remains in place; that's a major achievement. Let's not take it for granted because in a new trade order, based on tariffs, it's very difficult for a free trade agreement to survive," Mexico's top trade negotiator added.
To be sure, Mexico still has plenty of headwinds to navigate. US tariffs as high as 25% are still imposed on automobiles, steel, and aluminum, as well as on goods that do not comply with the USMCA trade pact among the North American countries.
In potentially a sign of things to come, carmaker Stellantis said it was pausing production at an assembly plant in Mexico and one in Canada, and temporarily laying off 900 workers at five US facilities.
In Canada, where Prime Minister Mark Carney is in campaign mode and benefiting in the polls from a tough-on-Trump approach, the response was more muted.
While Carney acknowledged on Wednesday the US president had in his tariff announcement "preserved a number of important elements of our relationship," on Thursday, Carney said Canada will impose a 25% reciprocal tariff on all vehicles imported from the United States that are not USMCA-compliant.
Flavio Volpe, president of Canada's Automotive Parts Manufacturers' Association, described Trump's decision not to impose new tariffs on Canada "like dodging a bullet into the path of a tank."
MEXICO'S ADVANTAGE
But in Mexico, which is the United States' top trading partner and has over the past 30 years built a manufacturing base that is deeply reliant on the US, the news that tariff-free trade will continue for many goods was heralded as a victory.
Among the products Mexico can continue to export to the US without tariffs are avocados and other agricultural goods, textiles and garments, and pharmaceuticals.
That access compares to a steep 32% tariff on US imports from Indonesia and a 46% tariff on products from Vietnam, both competitors of Mexico's in textile sales.
The Mexican peso gained strength on Thursday, appreciating to less than 20 pesos to the dollar for the first time since mid-March, as investors believe Mexico emerged relatively unscathed.
Trump's decision to mostly spare USMCA goods underlines his ambivalent relationship with the trade treaty. He has waxed hot and cold on the deal that he negotiated, at times praising it and at others saying Mexican factories continue to drain US jobs.
The US president has shown a propensity to change policies with little notice. But for now, Mexico seems to have an opportunity.
"Mexico and North America do appear to be in a relatively advantageous position versus other regions," said Julian Ventura, a former Mexican deputy foreign secretary and ambassador to China.
The USMCA is up for renewal next year, and analysts said Mexico should aim to start that renegotiation as quickly as possible to shift discussions with the US from avoiding tariff threats to talks on a refreshed trade deal.
"In this world, everyone is going to get tariffed. Instead of comparative advantages, it’s (about) comparative disadvantages," said Diego Marroquin Bitar, an expert on North American trade who also works as a consultant.
