Planned imposition of tariffs on imports from Mexico, Canada and China

President Donald Trump mentioned two reasons for this measure. Firstly, drug traffic into the USA, in particular the import of the synthetic drug fentanyl, which is produced in illegal Mexican drug laboratories and whose raw materials are imported into Mexico from China.  The second is the large number of illegal migrants entering into the USA.

However, after a phone conversation between President Trump and the President of Mexico, Claudia Sheinbaum, an agreement was reached to pause the implementation of these tariffs for one month. As part of the agreement, Mexico committed to deploying 10,000 members of the National Guard at the border to combat drug trafficking and migration, while the United States committed to stop the illegal trafficking of weapons into Mexico.

This temporary agreement aims to provide space for broader negotiations between both countries to address mutual concerns regarding security and trade. During this period, authorities from both nations are expected to work cooperatively on solutions that prevent an escalation in trade tensions and promote a more stable bilateral relationship. From his side, Trump has confirmed such agreement on his social media. Through a message on Truth Social, the U.S. leader explained that during the month-long suspension, negotiations will take place between both countries, led on the U.S. by Secretary of State Marco Rubio, Treasury Secretary Scott Bessent, and Commerce Secretary Howard Lutnick.

The planned introduction of tariffs would affect several key sectors of these countries' economies:

Mexico exports a significant number of vehicles and automotive components to the United States. With these tariffs, an increase in production costs and consumer prices in the United States is anticipated, as well as potential disruptions in supply chains, which could also delay automotive manufacturing. Mexico exports a high number of motor vehicles and motor vehicle parts to the United States. All leading German car manufacturers produce in Mexico and deliver primarily to the USA. At the beginning of April, President Trump will give a more ​detailed statement on the planned penal tariffs on automotive imports.

Other industries also benefit from the wage structure in Mexico and produce for the North American economic area. These tariffs are expected to increase production costs and consumer prices in the United States, possibly leading to a decline in sales and consequently also impacting German industry.

These tariffs do not only affect the sectors mentioned but also have the potential to trigger trade retaliations and create uncertainty in global financial markets.

A few days ago, President Trump imposed tariffs of 25 per cent on global imports of steel and aluminium into the USA, which are to come into force on 12 March 2025. Further tariffs on medicines and cars were also announced. In the case of steel tariffs, there will be a possible exception for Australia, as the USA has a positive commercial balance with Australia, however not for Mexico.

There is uncertainty about the future trade policy of the USA, particularly regarding the renegotiation of the USMCA free trade agreement (United States-Mexico-Canada Agreement) which is due to take place in July 2026. Although the free trade agreement between the three countries is due to remain in force until 2036, a “review” is due to take place in 2026.

Consequently, trade flows from Mexico, Canada and China could expand more into other regions, e.g. Latin America, Asia and Europe. A modernized trade agreement between Mexico and the EU was already concluded in January 2025 and the final legislation for its implementation is currently being processed. Mexico is already the EU's second largest trading partner in Latin America and deepening the trade relationship could open up new opportunities for other sectors of the economy.