A recent decision by the US Supreme Court striking down many of President Donald Trump’s tariff measures has offered Mexico and Canada a temporary reprieve, but significant economic risks remain for both countries’ trade with the United States.
Why are Canada and Mexico exempt from the 10% levy?
The court ruling forced the White House to adjust its approach. On Friday, Trump announced a 10 % levy on foreign goods under a separate law after his original tariff plan was struck down. In response to confusion over how the new tariff would apply, the White House clarified that goods shipped under the US-Mexico-Canada Agreement (USMCA) will be exempt from the 10 % tariff, effectively reducing the tariff burden for Mexico and Canada compared with the previous structure.
Before the Supreme Court’s intervention, products that did not qualify for a free-trade exemption faced steep duties, up to 35% for Canadian goods and 25% for Mexican goods.
The USMCA exemption now means that the effective tariff rates for both countries will be lower, as the agreement allows key imports like oil and essential manufacturing components, such as automotive parts, to continue entering the US market without higher duties.
How have both countries reacted to the development?
Officials from both countries have reacted cautiously to these developments. Mexico’s Economy Minister Marcelo Ebrard said he plans to engage with US counterparts and travel to Washington next week to discuss trade issues. In Canada, Dominic LeBlanc, the minister responsible for US trade relations, welcomed the Supreme Court’s ruling, describing the previously imposed tariffs under the International Emergency Economic Powers Act as “unjustified”, Bloomberg reported.
However, the respite might be short-lived. Other punitive tariffs on products such as steel, aluminium and cars are still in force, and experts warn that the Trump administration still has “a huge arsenal” of trade tools it could deploy to put pressure on Mexico and Canada. This could include expanding tariffs under broader national security provisions or other statutes.
Moreover, the exemption under USMCA does not eliminate underlying tensions. The trade pact itself is up for review this year, and the White House has signalled it wants changes that could complicate future cooperation.