The Threat Heard 'Round the World: What Potential Tariffs Mean for the Economic Future of North America
Whether or not tariffs against Mexico and Canada are implemented, the mere threat of tariff use does not bode well for the future of North American economic integration.
The threat of tariffs has loomed for Mexico since Donald Trump’s victory last November. Logistical details as to when they’d be imposed, on what products, and for how long remained unclear, but was made clear would be the strategic and heavy-handed use of economic tools and trade policy to address non-trade-related concerns, specifically migration, security, and drug flows.
Tariffs have been a moving target for the Trump administration. During his campaign, Trump promised to impose 25% tariffs on both Mexico and Canada on his first day in office. Once in office, he announced a delay in the tariff application until February 1st. Publicly, both Canada and Mexico announced that their governments had plans underway to address the potential tariffs, but did not tip their hand as to what these plans entitled. As promised, on February 1st, President Trump announced the tariffs - 25% for Canada and Mexico, 10% for China - set to become effective on Tuesday, February 4th.
And yet, political negotiations succeeded in delaying the implementation of tariffs for another month. In agreements announced today on X, both President Sheinbaum and Prime Minister Trudeau shared the actions their respective countries would take to strengthen their borders against the flow of fentanyl and thus staving off the tariffs. The Sheinbaum administration has agreed to send 10,000 National Guardsmen to the US-Mexico border and Canada has agreed to a $1.3 billion USD investment to reinforce its border with the US.
These announcements come just one day after President Sheinbaum issued a statement in response to President Trump's tariff plans during which she underscored her administration’s commitment to acting with “…courage and determination… [and] always act[ing] with a cool head and love for our people.” She refuted the White House's claim of links between the Mexican government and organized crime and underscored the key role the US plays in arms trafficking in Mexico, citing a Department of Justice report that found that 74% of guns used by organized crime in Mexico actually originated in the US. She utilized her speech to reaffirm her administration's commitment to addressing drug trafficking, noting that over the past four months, her government seized more than 40 tons of drugs and arrested more than 10,000 people involved in drug trafficking. She emphasized the importance of bilateral cooperation and coordination to address the challenging and multifaceted issues of migration, trade, and security, with mutual respect and consideration, stating that: “The principles of shared responsibility, mutual trust, collaboration, and above all, respect for sovereignty. Sovereignty is non-negotiable. Coordination, yes; subordination, no.” She closed her statement by restating her administration’s commitment to acting in the best interest of Mexicans and affirming that her administration is well-equipped to deal with the mounting challenge of tariffs, announcing that Plan B would be announced at her Monday morning press conference - which, of course, became unnecessary.
The implementation of tariffs will have very real, tangible consequences for the future of North America. But the mere threat of tariffs against two of the US's most important trading partners does not bode well for the future of regional cooperation. It is a major red flag ahead of the 2026 review of the USMCA and marks the potential for a significant shift in the North American trade dynamic. Should the tariffs be imposed, there will be a fundamental reordering of the North American economic landscape and it will inextricably impact the US-Mexico and US-Canada relationships.
The use of tariffs will not only inflict lasting damage on the North American economic relationship but also harm citizens across all three countries by disrupting supply chains, reducing job opportunities, and undermining economic efficiency. Perhaps even more concerning, however, is that imposing tariffs risks opening Pandora’s Box to alternative trade partners—the very competitors the US has long sought to keep out of the region.