Shifting Trade Winds: U.S. Tariff Plans and Their Global Impact

The current U.S. administration has signaled its intention to impose tariffs on key trading partners – primarily Canada, Mexico, and China – with additional measures targeting the European Union. While these tariffs are presented as a strategy to protect domestic industries, they introduce significant uncertainty for global supply chains and North American trade relations. This move challenges the stability of agreements like the United States-Mexico-Canada Agreement (USMCA), which was designed to ensure free trade within the region.

Beyond the immediate economic impact, the proposed measures reflect a broader policy shift toward economic nationalism. The administration’s focus appears to be on reducing trade deficits and bringing manufacturing jobs back to the U.S., even if it means viewing longstanding allies as economic competitors. However, this approach raises concerns about predictability and stability in trade, making it increasingly difficult for businesses to plan long-term investments and supply chain strategies.

Breaking down the proposed tariffs

The proposed tariff increases target multiple regions and industries, with some of the most significant measures including:

• China: Tariffs ranging from 10% to 60% on Chinese imports, potentially including goods routed through Chinese ports.
• Global Imports: A 10%-20% universal baseline tariff on all other countries.
• North America: A 25% tariff on imports from Mexico and Canada, currently on hold.
• Colombia: A 25% tariff on imports, linked to U.S. immigration policies, also on hold.
• BRICS Nations: A 100% tariff on imports from countries that abandon the U.S. dollar in trade.
• European Union: Industry-specific tariffs on steel, aluminum, copper, semiconductors, and other key sectors.

The sheer scale of these proposed measures has alarmed businesses across multiple sectors, particularly those reliant on cross-border trade.

How will these tariffs be implemented?

A key concern is the legal framework under which these tariffs would be enforced. The administration plans to implement them through the International Emergency Economic Powers Act (IEEPA), which grants broad authority to impose trade restrictions. However, questions remain about how rules of origin will be applied, particularly when dealing with multi-country supply chains and transshipment routes.

Currently, guidance from the Federal Register and U.S. Customs and Border Protection (CBP) remains vague, leaving businesses uncertain about how these measures will affect them. It is likely that the substantial transformation rule – a criterion already used in Section 301 tariffs on Chinese imports—will be the primary method for determining tariff applicability. However, importers face additional complexities in navigating USMCA preference rules, marking regulations, and substantial transformation criteria, all of which add layers of compliance challenges.

North America’s Trade Agreement at risk? What this means for USMCA

Since its launch in 2020, the USMCA has strengthened trade relations across automotive manufacturing, agriculture, and energy. However, these proposed tariffs could upend supply chains, raise production costs, and spark retaliation from Canada and Mexico.

With $1.5 trillion in trade between the three nations in 2023, any disruption to cross-border commerce will have widespread consequences. Canada and Mexico have already signaled that they may take legal action under the USMCA framework if these measures are enforced.

Adding to the uncertainty, the next USMCA revision is set for July 2026, meaning that businesses will have to stay vigilant for further trade negotiations and potential rule changes.

Economic consequences: What businesses should expect

Independent economic projections suggest that the proposed tariffs could shrink U.S. economic output by 0.4% and increase tax burdens by $1.2 trillion between 2025 and 2034. While these measures aim to protect American manufacturing, they are expected to increase costs for businesses and consumers.

For companies that rely on imports, these tariffs will likely translate into higher production costs, squeezed profit margins, and pricing pressures that could reduce competitiveness. Industries particularly affected include automotive, electronics, retail, and manufacturing, where global supply chains play a crucial role in keeping costs down.

The business community has largely opposed the tariffs, citing concerns over supply chain disruptions and inflationary pressures. Many U.S. manufacturers and retailers warn that such policies could backfire, increasing costs for American businesses and reducing their ability to compete internationally. Meanwhile, Canada and Mexico have already indicated they will challenge any trade violations under the USMCA framework.

Decades of trade integration across North America are on the precipice of major disruption by tariffs intended to be imposed on Canada and Mexico, the United States’ top trading partners.

No clear roadmap, but here’s where to start

With these potential disruptions on the horizon, businesses need to take proactive steps to safeguard their supply chains and ensure compliance.

One of the most immediate priorities should be evaluating tariff exposure by working closely with customs brokers and trade compliance experts. Ensuring that tariff classifications and documentation are accurate will be crucial to avoiding penalties and shipment delays.

Companies should also begin scenario planning for potential tariff increases by reassessing sourcing strategies and supplier diversification. This may involve identifying alternative suppliers, adjusting logistics routes, or reworking trade agreements to minimize exposure to sudden cost increases.

The Bigger Picture: A redefined global trade landscape

The U.S. administration’s aggressive tariff strategy could reshape global trade for years to come. While the goal is to boost domestic manufacturing, past experience shows that broad tariffs often lead to higher consumer prices, trade disputes, and long-term uncertainty.

If these measures go into effect, businesses will need to rethink their supply chains, cost structures, and long-term strategies. With so much still unclear, companies must closely monitor policy shifts and trade negotiations in the months ahead.

We will continue to track these developments and their impact on global trade. As companies navigate the challenges ahead, having access to the right insights and expertise can make a difference. Understanding risks, evaluating options, and adapting strategies will be essential to managing uncertainty. If you want to exchange insights, discuss challenges, or explore different approaches, we’re always open to a conversation.