Reuters reports that Mexican Economy Minister Marcelo Ebrard has responded to President Donald Trump’s threat of a 25% tariff on all Mexican and Canadian goods entering the United States when his second term begins in January. Ebrard warned Trump on Wednesday that such a tariff would lead to a loss of 400,000 jobs in the United States and slow economic growth.
At a press conference, Ebrard called the proposed tariff “a shot in the foot” and encouraged regional cooperation and integration. He singled out big automakers, namely General Motors, Ford, and Stellantis, that produce high volumes of vehicles in Mexico and export them to the U.S. Indeed, nearly 25% of all vehicle production in North America takes place in Mexico, and it’s the country’s most important manufacturing sector.
“While it’s generally understood that a blanket 25% tariff on any vehicles or content from Mexico or Canada could be disruptive, investors underappreciate how disruptive this could be,” Barclays analysts wrote in a note on Tuesday. They added that such a tariff “could wipe out effectively all profits” for the Detroit three automakers, assuming they don’t raise prices to mitigate the tariffs.
As GM Authority reported earlier this week, Donald Trump proposed the North American tariff, plus an extra 10% tariff on all Chinese goods, in a Truth Social post. In 2023, 83% of all Mexican exports and 75% of Canadian exports went to the United States, which gives Trump a great deal of leverage over trade agreements on the continent.
As president, Trump will have the authority to unilaterally impose new tariffs without an act of Congress, but some analysts are calling it a threat to bring America’s trade partners to the negotiating table. “This strikes me more as a threat than anything else,” former National Foreign Trade Council President William Reinsch told Reuters. “I guess the idea is if you keep hitting them in the face, eventually they’ll surrender.”
The U.S.-Mexico-Canada Agreement (USMCA), which President Trump signed in 2018, has a “sunset” provision opening it up to renegotiation in 2026, but Trump’s rhetoric could motivate Canada and Mexico to renegotiate the deal sooner.
