Potential Mexican and Canadian Tariffs: Top-Line Insights & How Businesses Can Adapt

Potential Mexican and Canadian Tariffs: Top-Line Insights & How Businesses Can Adapt

By: Michael D. Easton, President, General Manager

Businesses Forced to Rethink Supply Chains, Asses Risk & Explore New Sourcing Strategies

Rising trade tensions between the U.S., Canada, and Mexico create uncertainty for businesses relying on cross-border imports. While 2025 tariffs on Canadian and Mexican goods have been delayed for further negotiation, their potential implementation could drive up costs, disrupt supply chains, and challenge the stability of the U.S.-Mexico-Canada Agreement (USMCA).

For industries like automotive, agriculture, electronics, and manufacturing, the possibility of increased tariffs demands proactive planning. Companies must be prepared to analyze risks, adapt sourcing strategies, and explore long-term resilience measures to remain competitive in a shifting trade landscape. Below are the insights and recommendations I’ve shared with Star USA clients to help them overcome potential tariff challenges.

Impact on Key Industries 

Although tariffs on Canadian and Mexican imports are not yet in effect, businesses must prepare for potential cost increases and supply chain disruptions. A 25% tariff has been suggested for most imports, with Canadian energy resources facing a 10% tariff. 

How Tariffs Could Affect Costs

Tariffs on Canadian steel and aluminum would raise costs for U.S. manufacturers, making production more expensive. A unit that previously cost $100 could rise to $125 under a 25% tariff. The automotive industry, which depends heavily on Mexican-made components, could see significant price hikes, leading to higher consumer costs and potential declines in demand. Agriculture, another heavily impacted sector, would experience increased costs on Mexican-sourced produce and raw materials, affecting food supply chains and retail pricing. 

How Businesses Are Responding 

Many companies are exploring strategies to mitigate rising costs to prepare for these potential changes. Some businesses are renegotiating supplier contracts to distribute the financial burden, while others are investing in inventory management technology to optimize stock levels and reduce overhead expenses.  

A growing number are also evaluating alternative suppliers in countries outside North America. They plan to weigh the trade-offs between a higher tariff or extended lead times caused by shifting production elsewhere. 

A potential downside to these shifts is that alternative sourcing may introduce new regulatory and logistical challenges. As businesses strategize their next moves, they must carefully weigh whether absorbing the tariffs is more cost-effective than restructuring their supply chains. 

Plan Your Tariff Strategy with Expert Support

Services tailored to navigating the global market with precision. 

Potential Retaliation & Future Trade Barriers

Beyond cost concerns, the possibility of retaliatory actions from Canada and Mexico presents additional risks. Both countries have signaled that they may respond with counter-tariffs on U.S. exports, further increasing trade costs. In addition to tariffs, non-tariff measures like increased import inspections, stricter licensing requirements, or new import quotas could create further complications for businesses reliant on cross-border trade. 

Trade relationships with the European Union and the United Kingdom are also under scrutiny, with speculation that the U.S. may expand tariffs to include goods from these regions. Additionally, fluctuations in currency value—especially if the U.S. dollar strengthens—could alter trade dynamics, making American exports more expensive and less competitive in international markets. 

USMCA & Future Trade Relations 

The uncertainty surrounding tariffs raises questions about the long-term stability of USMCA. Designed to provide predictability in North American trade, the agreement could face new challenges if tariff disputes escalate. 

How Tariffs Could Impact USMCA

Tariffs create instability, making it harder for businesses to plan long-term investments. If these trade barriers are enacted, they could undermine the core intent of USMCA—ensuring a stable, mutually beneficial trade environment between the U.S., Canada, and Mexico. Additionally, some experts believe that such tariffs may violate existing USMCA commitments, potentially leading to legal disputes and diplomatic tensions. 

What Businesses Should Watch For

Companies must stay informed about potential policy shifts by monitoring: 

  • Political rhetoric: Trade policies are often signaled through speeches and official statements. 
  • Economic indicators: Changes in GDP growth, trade deficits, or unemployment rates may signal shifts in trade policy. 
  • Diplomatic relations: The strength of U.S. relationships with Canada and Mexico will influence future trade agreements. 

Proactive Steps for Businesses

Companies should take proactive steps to minimize risks to navigate potential trade changes. I’ve recently recommended these actions to our clients: 

  • Conduct a compliance audit to ensure adherence to evolving trade regulations. 
  • Stay informed about tariff developments and legal challenges. 
  • Provide ongoing training to key staff on trade regulations and compliance requirements. 
  • Develop contingency plans for alternative suppliers or transportation routes. 

If you’re interested in these action steps, let’s talk! My team can create a tailored solution to help you adapt to this situation with proactive measures.  

Long-Term Opportunities 

While new tariffs present challenges, they also create opportunities for businesses to strengthen operations and explore new strategies. Companies that act decisively now can position themselves for greater stability in the long run. 

Potential Advantages of Trade Shifts

Some businesses are already considering reshoring as an opportunity to boost domestic manufacturing. With rising concerns about supply chain vulnerabilities, many companies emphasize "Made in the USA" branding as a selling point.  

Diversifying supply chains to reduce reliance on single-source suppliers has also become a priority. This aims to ensure that disruptions in one region don’t bring entire operations to a halt. Investments in multimodal transport solutions, which provide more flexibility in how goods move across borders, are also becoming increasingly valuable. 

Industries That May Benefit

Certain industries stand to gain from these trade shifts.

  • U.S. manufacturing – Particularly in automotive, chemicals, and pharmaceuticals, where domestic production could see growth. 
  • Supply chain & regulatory professionals – Demand for trade compliance expertise is expected to rise. 
  • Companies with strong distribution networks – Businesses able to pivot quickly between suppliers and logistics partners will have a competitive edge. 

Proven Long-Term Strategies

It’s one thing to be aware of trade shifts; it’s another to face them head-on with strategic thinking. These are the long-term strategies I’ve seen businesses implement time and again to overcome trade shift challenges: 

  • Scenario planning & risk management: Businesses investing in risk forecasting and flexible contingency strategies are better equipped to handle trade volatility. 
  • Collaboration across supply chains: Strengthening relationships with suppliers and logistics partners enhances resilience. 
  • Investment in regulatory expertise: Businesses that stay ahead of compliance requirements avoid costly disruptions. 

You Don’t Have to Adapt to Potential Mexican & Canadian Tariffs Alone  

Although new tariffs on Canadian and Mexican imports have not yet been enacted, businesses cannot afford to wait for final decisions before taking action. The uncertainty surrounding these trade policies highlights the importance of preparing for supply chain disruptions, strengthening compliance efforts, and exploring alternative sourcing strategies. 

Companies that take a proactive approach—whether through risk assessments, supplier diversification, or domestic production investments—will be in the best position to withstand potential policy shifts. While trade tensions continue to evolve, businesses that stay informed and adaptable will emerge stronger in the long run. 

For expert guidance on navigating trade shifts, Star USA can help businesses assess risks and develop customized compliance strategies. Let’s start the conversation about how we can work together to overcome your challenges! 

 

Sources ReutersAssociated Press 

Related Posts

CBP: Section 321 Enforcement Update in ACE to Block Ineligible De Minimis Shipments

CBP is enhancing Section 321 enforcement within ACE to ensure compliance with the $800 de minimis threshold. Starting June 26, the update will be deployed to the CERT environment. This enhancement will prevent the release of shipments claiming de minimis entry when the $800 per person per day limit has already been exceeded, helping to…

OFAC: GVA Capital Fined $216M for Russia Sanctions Violations

The Office of Foreign Assets Control issued a penalty notice for almost $216M on GVA Capital Ltd. They’re a venture capital firm in California. This is for violating the Russia sanctions and failing to comply with a subpoena. Read More

Justice: DOJ Declines to Prosecute PE Firm After Voluntary Disclosure of Export Violations

The United States Department of Justice declined to prosecute a private equity firm after they discovered criminal violations of export laws that one of their acquired companies had committed and disclosed them voluntarily. Read More

An electronic chip

Case Study: Import Compliance Consulting Creates Competitive Advantage for a Global Manufacturer

When a company starts measuring compliance by the absence of chaos, you know there’s a storm coming. That’s precisely what we saw when a global electronics manufacturer came to us during a crisis for import compliance consulting. They had grown rapidly, expanding operations into 17 countries, without updating their import compliance strategy. It wasn’t long…