Hefty tariffs on Canada, Mexico come into effect

US move will disrupt supply chains across North America, warn experts

US President Donald Trump's imposition of new tariffs could disrupt North American supply chains and especially damage the continent's auto industry, experts say.

Trump's new 25 percent tariffs on goods from Mexico and Canada took effect on Tuesday.

In response, Canadian Prime Minister Justin Trudeau said that Canada would impose 25 percent tariffs on $107 billion worth of US goods.

"Our tariffs will remain in place until the US trade action is withdrawn," he noted on Monday, adding the Canadian government is in "active and ongoing discussions "with provinces and territories to pursue several nontariff measures.

On the same day, Canada's Ontario Premier Doug Ford said his province is ready to cut off electricity and critical mineral supply to the US in response to the tariffs.

"If they want to try to annihilate Ontario, I will do anything, including cutting off their energy, with a smile on my face," he said.

Mahmood Nanji, a policy fellow at the Ivey Business School and a former associate deputy minister of finance for Ontario, said the tariffs could also cause economic disruption across the region.

He highlights that the auto sector in North America will be disrupted.

"It would have a huge impact on the Canadian auto sector," Nanji told China Daily. "But it would also have a huge impact on the American auto sector."

Nanji said: "The auto industry in North America could collapse within days, if not weeks."

Nanji noted the deep integration of North America's auto supply chain. "Parts can cross the border seven or eight times before a vehicle is fully assembled," he said.

The expert said it's projected that the cost of a car could increase by $4,000 to $5,000. And when that happens, Nanji said the demand will shrink because the auto industry is "incredibly competitive", and consumers might switch to vehicles from manufacturers not affected by the tariffs.

Nanji predicted that US businesses and consumers would also feel the pressure. "If the cost of producing vehicles skyrockets, stock markets will react, and US consumers will face higher prices," he said. "The consequences of disrupting a supply chain this integrated would be profound and immediate."

Juan Carlos Baker Pineda, former Mexican vice-minister for foreign trade, also underscored the economic risks of such a measure.

The automotive sector accounts for nearly 4 percent of Mexico's GDP and generates thousands of jobs directly linked to exports to the US, according to Baker.

Baker said that Mexico is not just an exporter — it plays a critical role in the North American supply chain.

Creating bottlenecks

"With over 80 percent of Mexican car exports destined for the US, a tariff would create bottlenecks and inefficiencies, forcing companies to either absorb higher costs or shift production strategies," he said.

"If tariffs are imposed, we would likely see job losses, delays in production and higher vehicle prices for American consumers — exactly the opposite of what protectionist policies claim to achieve," he said.

Baker said the Mexican government needs to communicate the effect that the tariffs would have.

Ahead of Trump's announcement on Monday, Mexican President Claudia Sheinbaum, at her morning news conference, called for "temperance, serenity and patience" as the tariffs loomed, reassuring the public that her administration has multiple contingency plans in place.

Baker also stressed the importance of reducing Mexico's reliance on the US market.

"Perhaps this could be an opportunity to diversify trade relationships so that Mexico is not overly dependent on the US market," he said.

Xinhua and agencies contributed to this story.

gaoyang@chinadailyusa.com