Mexico, Canada ($USMCA) have gained a temporary reprieve after the White House announced that goods shipped under the US-Mexico-Canada Agreement will largely escape the newly implemented 10% global tariff.
This development follows a significant ruling from the U.S. Supreme Court, which overturned President Trump’s earlier use of emergency powers to impose even steeper tariffs. While the exemption reduces the immediate tariff burden for the two largest trading partners of the U.S., it heightens the importance of the upcoming USMCA review.
A Lower Effective Tax Rate
In an unexpected turn of events, the Supreme Court's decision has actually benefited North American exporters in the short term.
Previously, non-qualifying products faced hefty tariffs of 25% for Mexico and 35% for Canada. However, with the shift to a 10% global levy combined with USMCA exemptions, economists from Desjardins and Grupo Financiero Base predict that the effective tariff rate will slightly decrease from current levels, approximately 3.7% for Canada and 4.4% for Mexico.
This exemption is seen as a crucial advantage for the Automotive (CARZ) and Energy (XLE) sectors, allowing oil and essential manufacturing components to continue crossing borders without significant price increases.
Trump's Trade Tools
Trade specialists caution that, despite losing one of his preferred trade levers, President Trump retains other significant tools. White House officials have indicated a potential shift towards Section 301 investigations, similar to those employed during the initial trade conflict with China, as well as Section 232 inquiries related to national security.
“The president didn’t lose his leverage; he just lost a lever,” remarked trade attorney Barry Appleton. There is concern that the administration may now resort to using administrative measures to circumvent Congress and the judiciary.
USMCA Under Scrutiny
The most pressing challenge for the Mexican Peso (MXN) and Canadian Dollar (CAD) continues to be the 2026 USMCA review. Reports indicate that President Trump has been questioning his aides about the necessity of the agreement, and analysts suggest that the recent Supreme Court ruling adds fuel to the fire for a substantial overhaul.
“It is making it more painful for Mexico and Canada to trade with the US, even if they comply with the agreement,” stated Diego Marroquin from the Center for Strategic and International Studies.
For investors, the immediate exemption offers a relief for North American supply chains. Nonetheless, the “USMCA Risk Premium” is likely to persist in the markets as the administration transitions from broad executive actions to targeted, country-specific trade strategies.
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