Assessing the Potential Impact of Trump’s Tariffs on Canada, Mexico, and China

On Saturday, February 1, President Trump made good on one of his campaign promises by imposing 25% tariffs on most goods imported into the U.S. from Canada and Mexico. In addition, the president planned to implement an additional 10% tariff on Chinese goods. The tariffs for all three countries were laid out in a White House memo published the same day. 

Instead of the more targeted, deliberative approach favored by his predecessor—who focused on applying import duties to strategically significant goods like semiconductors, solar panels, and electric vehicle batteries—Trump has followed through on a more sweeping, all-encompassing trade measure. The gambit is a bold, consequential move, with wide-ranging reverberations for America and the three countries that represent its largest trade partners. 

Mexico and Canada Negotiate 30-Day Tariff Pause 

On Monday, February 3, President Trump reached an agreement with President Claudia Sheinbaum of Mexico that would delay the 25% tariffs targeting the country by at least a month. The two presidents struck a deal in which Mexico would deploy an additional 10,000 troops on the U.S-Mexico border to help restrict the flow of illegal drugs and migrants into the United States. While Trump said he would “immediately pause” the import controls, the tariffs on Mexico are not completely off the table. 

Hours after a deal was struck with Mexico, President Trump also agreed to a postponement on the tariffs aimed at Canada. The pause was reached after multiple calls between Trump and Canadian Prime Minister Justin Trudeau, who announced that the two countries had formed a “Canada-U.S. Joint Strike Force to combat organized crime, fentanyl and money laundering.” Trudeau also cited a new intelligence directive he signed that involved addressing these border issues. 

When Will the New Tariffs Go Into Effect?

The tariffs announced on February 1 were originally set to go into effect at 12:01 a.m. Eastern Time on Tuesday, February 4. After negotiations on Monday, February 3, Canada and Mexico each reached separate agreements to pause implementation for 30 days. 

Overview of Existing Tariff Landscape 

As of February 3, 2025, tariffs on goods imported into the U.S. from Canada and Mexico were limited by a trade agreement signed by Trump during his first term. As a result, the majority of goods traded between the three countries were not subject to tariffs prior to the new trade measures. 

Conversely, there are a wide range of existing tariffs covering many different Chinese goods. In a two-year span across 2018 and 2019, President Trump announced four sets of tariffs on China. In the first package, which went into effect in July 2018, the government levied 25% taxes on $34 billion of Chinese imports. The next month, an additional $16 billion of Chinese goods were subjected to a tariff rate of 25%. Then, in September, the administration imposed 10% tariffs on another $200 billion of Chinese goods. Finally, in August 2019, Trump announced a second round of 10% tariffs on yet another $300 billion worth of Chinese imports. 

In May 2024, the Biden administration and the U.S. Trade Representative reviewed the previous administration’s tariffs under Section 301, and decided to keep them in place. In addition, Biden levied his own increases on $18 billion worth of Chinese goods. Biden’s trade actions increased the tariff rate on steel and aluminum to 25%;the rate on semiconductors to 50%; the rate on electric vehicles to 100%; and the rate on batteries, battery components, and critical minerals to 25%. The tariff increases were scheduled to go into effect in September 2024, January 2025, and January 2026, respectively. 

Where to Find the Active Tariff Lists

Lists covering all active tariffs on China can be accessed through the Office of the U.S. Trade Representative (USTR), under China Section 301. The USTR has published four different lists of tariffs, as well as a fifth document, the “four-year review,” which contains more tariff actions carried out by the Biden administration against China. While the complete list of Chinese goods currently subject to U.S. tariffs is too numerous to outline here, products whose tariff rate increased between September and January 2024 alone include electric vehicles, solar cells, EV batteries, and semiconductors.

Should the new slate of tariffs eventually go into effect against Canada and Mexico, they will also be available on the USTR website.

What Is the Harmonized Tariff Schedule?

According to the U.S. International Trade Commission, the Harmonized Tariff Schedule “comprises a hierarchical structure for describing all goods in trade for duty, quota, and statistical purposes.” In practice, the HTS is a large database that federal agencies draw on to determine the tariff rates of goods being imported into the U.S. All imports are assigned a 10-digit HTS code based on their product category, material composition, and intended function, which is then searchable in the HTS database.There are currently over 19,000 HTS codes that federal agencies use to determine the tariff rates, quotas, and other financial implications associated with imported goods. 

What Items Are Subject to the New Tariffs?

Crucially, these executive orders cover nearly all goods imported into the U.S. from Canada, Mexico, and China. The only exception is a special carve-out for energy resources from Canada—a range of products that include crude oil, natural gas, biofuels, and refined petroleum. These goods are subject to a 10% tariff rate. 

The three countries President Trump targeted on February 1 collectively make up roughly one-third of all U.S. imports, and the new tariffs—should they eventually go into effect—will impact a slew of everyday items ranging from fruits and vegetables to gasoline, cars, and electronics. 

• Food and Agricultural Products: Mexico is the U.S.’s largest supplier of fruits and vegetables, including tomatoes, avocados, peppers, strawberries, and raspberries. Canada, meanwhile, exports grain, poultry, and red meat to America. 

• Automobiles and Automotive Parts: The U.S. imports well over $100 billion worth of cars and car parts from Mexico each year. Given how deeply the American automotive industry has invested in manufacturing in Mexico in recent decades, the 25% tariffs on these products is all but guaranteed to hit the industry especially hard. 

• Semiconductors: Few major chips firms are headquartered in Canada, Mexico, or China. But many large companies integral to the global semiconductor ecosystem—including TSMC, Nvidia, Applied Materials, and Intel—have factories, assembly sites, and other manufacturing facilities in China or Mexico. These chipmakers could be dealt a significant blow if the new tariffs are kept in place for a significant period of time, cutting into revenue and forcing firms to raise prices for the myriad of industries that rely on the essential microelectronics. 

How Will These Tariffs Impact Canada, Mexico, and Their Domestic Industries?

Unlike China, which has the world’s second-largest economy and major trade partners all over the world, Canada and Mexico are heavily reliant on their relationship with—and access to—the U.S. market. This unique level of dependence on exporting goods to America gives the new tariffs significant weight and consequence, with the potential to adversely impact a range of domestic industries in these countries.

Impact of Tariffs on Mexico

To understand the importance of the U.S. market to Mexican industry and manufacturing, consider these two statistics: in 2024, the country shipped 84% of its total exports to the United States, accounting for roughly 30% of Mexico’s entire gross domestic product (GDP). 

The sector with the largest stake in that export relationship is the auto industry. Mexico sends out nearly $160 billion worth of vehicles and automotive parts to the U.S. every year, a figure that represents 5% of the nation’s GDP. In addition, the auto factories, assembly sites, and other manufacturing facilities in the country employ a total of over one million people, a sizable proportion of the nation’s total workforce. If Trump’s tariffs were to be implemented, the cost of importing vehicles and parts from across the border could be seen as prohibitive for some U.S. manufacturers, potentially triggering heavy job losses in the country. 

Looking beyond the ramifications of potential tariffs on Mexico’s domestic industries, the trade barrier’s ripple effects would also be felt throughout the multi-trillion-dollar global auto industry. A slew of major carmakers draw from supply chains with significant manufacturing operations in Mexico. According to a recent report by S&P Global, Nissan sources around 27% of its total U.S. sales from Mexico, General Motors sources 22%, and Volkswagen over 40%. The implementation of a 25% tariff on all the vehicles and auto parts these manufacturers are importing from Mexico into the U.S. would wreak havoc on their balance sheets, almost certainly compelling them to raise the sticker prices on their cars. Over time, such taxes could serve as a catalyst for larger, more structural changes, too, including forcing automakers to seriously consider rebuilding supply chains in a way that favors American manufacturing. 

In addition to cars and other automotive products, Mexico also sends a substantial proportion of the electronics it produces over its northern border. In 2022, the total value of electrical and electronic equipment (EEE) Mexico exported to the U.S. topped $85 billion, according to the United Nations COMTRADE database on international trade. Major EEE products exported to the U.S. from Mexico include: 

• Televisions
• Computers and laptops
• Integrated circuits (ICs)
• Video displays
• Insulated wires and cables

Impact of Tariffs on Canada

Canada is similarly reliant on the U.S. to carry the lion’s share of its export industry: in 2023, 77% of the country’s total exports were shipped to the United States. The Canadian industries that are most dependent on the U.S. market include energy products, automobiles and automotive parts, and plastics. Given how critical Canada’s energy resources are to America, though, President Trump limited the tariff rates on these goods to 10%. This measure will no doubt assuage the potential fallout for Canadian energy companies and help reduce the chances of major disruptions to U.S. industries and infrastructure that rely on Canadian petroleum and natural gas. 

Nonetheless, even a 10% tariff on Canada’s energy products would likely push energy prices higher for businesses and individual consumers in the U.S. Canada provides over 20% of all the crude oil used in the U.S.—and over half of the total crude the nation imports—much of which is refined and used in the Midwest and metropolitan areas like Chicago and Detroit. Tariffs would not only drive up costs directly, in energy markets, but could also indirectly trigger higher prices. If domestic energy companies feel less threatened by prices from foreign competitors, they could become emboldened to increase their own rates. Such a dynamic would effectively reward U.S. energy companies while penalizing both foreign competition and U.S. consumers. 

Canada’s auto industry, meanwhile, could face even harsher impacts. The nation’s automotive sector has deep, intricate ties to U.S. automakers, and tariffs as steep as 25% could trigger a seismic shift in this interdependence. Factories in Canada could stop shipping to customers in the U.S., and the impact on their bottom lines may ultimately lead many to be shuttered altogether. 

Z2Data Analysis 

Industries and manufacturers that incorporate electronic components into their products often rely on sprawling supply chains with manufacturing nodes in an array of different countries. To see how Trump’s tariffs could impact these businesses and the electronic component supply chain more broadly, Z2Data used its internal databases to carry out a data analysis.

To arrive at the data in this report, we filtered all the parts in our Z2Data database based on a country of origin (COO) of Mexico or Canada. Our analysis—which was based on all the parts in our database—found that 4.2 million active electronic components could be impacted by the 25% tariffs on Canada and Mexico. Most of the impact would be on passive components, with a much smaller number of semiconductors affected. 

• 4.2 million active electronic components 

What President Trump Hopes to Achieve with New Tariffs

Tariffs have been traditionally used to serve a number of purposes, including providing an additional source of revenue for federal governments; restructuring supply chains to favor domestic manufacturers and industries; and targeting unfair trade practices being carried out by foreign countries. (Last year, for example, the Biden administration explained their decision to levy new tariffs on China by accusing the country of unfair trade practices that were “threatening American businesses and workers” and “flooding global markets with artificially low-priced exports.”)

President Trump, however, sees even more advantages to tariffs. According to a White House fact sheet that ran shortly after Trump officially announced the new tariffs, the trade barriers were being imposed to address “The extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl.” The administration characterized these risks as “a national emergency under the International Emergency Economic Powers Act (IEEPA).” The 25% tariffs on Canada and Mexico, as well as the new tariffs on China, are a way of utilizing America’s unparalleled economic influence to force these countries to do more to stanch the flow of migrants, drugs, and precursor chemicals used in synthesizing fentanyl and other opioids into the United States. 

The Trump administration is effectively using the multi-trillion-dollar U.S. market as a potent form of leverage in diplomatic affairs. As the White House memo succinctly put it, “Access to the American market is a privilege.” The federal government is now threatening to revoke that privilege in an effort to mitigate two issues that the current administration has placed a high priority on.

Know What Components Are Vulnerable to Tariffs with Z2Data 

As we settle into a new U.S. presidential administration, the level of uncertainty around tariffs, sanctions, and other trade controls is rapidly escalating. The Trump administration’s use of trade barriers—and the threat of long, costly trade wars—introduces a new risk variable for manufacturers. Businesses that want to understand their vulnerabilities need maximum visibility into their supply chains. At Z2Data, we help businesses track component origins using tools like part-to-site mapping, connecting bills of materials to manufacturers worldwide. Our Sourcing Status feature in Supply Chain Watch also aids trade compliance, providing visibility into site and country dependencies and identifying components subject to tariffs and other trade barriers.