The Border Trade That Could Collapse Due to Tariffs

President Trump’s tariffs - and retaliation from Mexico and Canada - could nearly wipe out cross-border trade in major sectors of the cross-border economy, including mining, lumber, computers and electronics, research by the Brookings Institution shows.

Tariffs of 25 percent on all Mexican goods and most Canadian goods entering the United States went live midnight last Tuesday and were paused Thursday for all goods under the United States-Mexico-Canada Agreement until April 2, corresponding to roughly 50 percent of Mexican imports and 38 percent of Canadian imports. On Wednesday, the 25 percent levy had already been paused for cars, a product at the heart of the Trump administration’s ire about nearsourcing and one that U.S. consumers are considered to be price-sensitive on.

Tariffs against Canada and Mexico had previously been paused between February 1 and March 3, showing the back-and-forth, crude-force style of negotiating the new U.S. government has employed with other countries, including its close allies.

Brookings data shows that mining exports from the U.S. to Canada could decline 97 percent in a reciprocal tariff scenario of both countries imposing 25% tariffs on each others goods, while mining import from Mexico to the United States would meet a similar fate. The U.S. tariff alone would let mining exports to Canada dwindle by almost 60 percent, the data predicts. Canada’s mining imports to the U.S. could be affected to the tune of almost 70 percent.

Motor vehicles, the United States’ most valuable import good, could see losses in trade volume of around a quarter for shipments leaving the U.S. and of 40-50 percent for incoming deliveries from neighbors just due to U.S. tariffs. In a reciprocal scenario, this would rise to 50-65 percent, showing that Trump’s tariffs on neighboring countries are a high stakes gamble in which all parties have a lot to lose. Automakers said the tariffs would be devastating to them and that their supply chains were integrated across borders in North America, meaning many cars were partly American and partly foreign made.