Trump's tariffs could plunge Mexico and Canada into a recession

Trump's tariffs could plunge Mexico and Canada into a recession

The tariffs introduced by President Donald Trump on imports from Canada and Mexico could have serious effects on the economy of both countries. Economic analysts warn that this would slow down the production of certain goods, increase prices and stir up fears from a possible recession.

introduction of tariffs

On Tuesday, the US government charged 25% tariffs on imports from both neighboring countries and a 10% tax on Canadian energy. Although Canada and Mexico also threaten to do against tariffs that could affect the US economy, they are much more dependent on the trade in the USA. The United States is considered the largest export market for both countries.

economic dependence on the USA

Last year were worth around $ 505 billion to the United States, which corresponds to around 30% of its gross domestic product (GDP). Canada exported over $ 412 billion, about 20% of his GDP. In contrast, US exports to Canada ran at around $ 349 billion last year, which is only a little more than 1% of US GDP. The situation was similar with Mexico, which exported the value of around $ 334 billion, which also only makes up for around 1% of US BIP.

effects on Canada

The automotive and energyectors of Canada will be most affected, Drew Fagan, professor at the Munk School of Global Affairs and Public Policy from the University of Toronto, explained. According to the US Census Bureau, goods worth around $ 185 billion are imported from these sectors into the USA.

After the tariffs come into force, Canadian automobile manufacturers are forced to pay higher taxes for the export of cars and auto spare parts to the USA. This could force you to temporarily suspend production while looking for ways to compensate for these costs, said Fagan. Producers could decide to pass these costs to consumers, which could lead to inflation.

"If it is a 25%customs, it is far greater than the profit. If you cannot pass these costs to consumers, it will ultimately be unprofitable to continue producing," he warned and added that a production break could also lead to a loss of jobs.

The influence on the energy sector

Canada is the largest energy provider in the United States. In 2023, Canada provided around 60% of crude oil imports to the United States, 85% of electricity imports and 99% of natural gas quantities. The value of all three sectors is around $ 100 billion. If the tariffs disturb the energy delivery chain, Canada will be more affected than the USA because the most important customer is still the United States.

"The effects on us are admitted, admittedly, greater than the effects on the United States," said Fagan, adding: "If you raise a 25%customs to the majority of it, this will immediately have an impact on the economy, may even trigger a recession." Canada's Prime Minister Justin Trudeau admitted that the trade war would harm Canadian workers and promised state support for companies to alleviate the effects.

effects on Mexico

reactions of Canada and Mexico

Trudeau announced that Canada will react with her own tariffs. In the next month, 25% tariffs are to be charged on US goods worth $ 155 billion, with $ 30 billion in force. President Claudia Sheinbaum from Mexico also explained that her country would react with counter -tariffs and other measures.

The announced retaliation measures will also have negative consequences for all three economies, says Marczak. In the future, both countries will have to assess whether they can accept these effects or develop strategies in order to meet Trump's requirements. Trudeau emphasized that Canada would work with Mexico to find new ways in dealing with the tariffs.

This article was supported by Gerardo Lemos, Anna Cooban and Sebastian Jimenez Valencia.