The world trade system is undergoing its greatest reconfiguration since post-war times, according to the Mexican Institute for Competitiveness (Imco), following U.S. President Donald Trump’s April 2 announcement of reciprocal tariffs on trading partners aimed at closing his country’s trade deficit.
Key Tariff Milestones
- 25% General to Mexico and Canada: Effective since March 4 (suspended for T-MEC products meeting origin requirements).
- 25% on Steel and Aluminum: Effective since March 12.
- 25% on Assembled Vehicles: Effective since April 3.
- 10% General to All Countries: Effective since April 5.
- Reciprocal Tariffs: Enter into effect April 9, but suspended for 90 days on April 10, “to give a chance to negotiations.”
Trump’s subsequent decision to suspend tariffs raised eyebrows. Just before the announcement, he tweeted: “It’s a great time to buy!”, leading to a historic Wall Street surge after several days of decline. The Dow Jones index closed with a 7.87% increase—its largest since 2008—and the Nasdaq rose by 12.16%, its biggest gain since 2001.
Several U.S. senators are now investigating whether Trump engaged in insider trading or market manipulation, encouraging stock purchases just before his tariff policy shift.
Special Conditions for T-MEC Partners
For Mexico and Canada, reciprocal tariffs do not apply. However, other restrictions persist: goods under the T-MEC maintain a 0% tariff while orders remain in force (under the International Emergency Economic Powers Act, IEEPA). Non-compliant goods face a 25% tariff, and energy & potash imports not meeting T-MEC requirements get hit with a 10% tariff.
Once IEEPA orders on fentanyl and migration are lifted, T-MEC goods will retain a 0% tariff; non-compliant goods tariffs drop to 12%. In 2024, 49% of Mexican imports entered the U.S. under the T-MEC.
Other trade lacking T-MEC coverage must restructure supply chains to boost regional content and meet Tratado standards. This poses varying challenges depending on current regional content levels, with some products having minimal regional input previously enjoying low duties (e.g., 2.0% for industrial goods).
U.S. tariffs of 25% on autos, steel, and aluminum persist as do risks of expanded lists affecting related products. Mexico and Canada are negotiating, with the former aiming to boost national content in exports under their Plan México.
Retaliation Announcements
Mexico’s President Sheinbaum pledged dialogue and negotiation. Canada’s PM Carney imposed a 25% tariff on U.S. auto imports not meeting T-MEC requirements, with a 25% tariff on non-Canadian/non-Mexican content.
EU President von der Leyen announced retaliatory measures worth approximately $28.4 billion in response to steel and aluminum tariffs. China countered with 34% tariffs on all U.S. imports, starting April 10.
Though not in a superior position absolutely, Mexico is relatively better off compared to the U.S., despite ongoing steel and aluminum tariffs from Mexico.
The T-MEC’s significance—along with Mexico and Canada as investment destinations—may grow post-April 2, presenting opportunities for consolidating Mexico’s attractiveness to investors amid U.S. global trade restrictions.
