North America Trade Expert: Canada, Mexico Tariffs Could Be Less Than 25%

"I had heard as late as [that] Sunday night -- when I was down at the Ohio [inauguration] ball, I was hearing that," he said.

But Ujczo, who works in Columbus, Ohio, said since they didn't, he's not sure what way things will work out. Will the president put maximum pressure on Canada and Mexico with 25% tariffs on most or all goods starting Feb. 1? Will he go back to what he threatened in 2019, a 5% tariff that would increase by 5 percentage points each month until he's satisfied? Will he decide that Canada has done enough, or that Mexico has, and only impose tariffs on the other neighbor? Will there be no tariffs at all?

"If I was betting money I think it would be the 5% escalator," Ujczo said, but said he can also picture President Donald Trump deciding the migration and anti-drug smuggling measures offered by Mexico and Canada are acceptable, and no tariffs go on now.

"The fact that Canada keeps coming up is a concern," Ujczo said. In fact, as Ujczo was talking to International Trade Today, Trump said again that if Canada became the 51st state, there would be no need for tariffs, and he wouldn't mind if companies expanded operations in Canada. Ujczo wonders if Trump is going to suddenly add Canadian military spending (Canada is a NATO member) to his list of demands.

"By all accounts, there’s significant progress being made by both Mexico and Canada to address the border and fentanyl," Ujczo said, but the Trump administration is still pushing for Mexico to take on the cartels with aggressive action. "It may sound like a relatively straightforward ask but it’s a significantly risky ask," Ujczo said. In 2019, members of the Mexican National Guard and the Mexican military had to give up on an attempt to arrest a cartel kingpin in the capital of Sinaloa when the cartel's gunmen had more firepower and numbers. Mexican law enforcement did successfully arrest the man in January 2023, and he has since been extradited to the U.S.

Even if Canada and Mexico escape punishment now, Ujczo said he's telling his contacts in those countries that they shouldn't feel like they're out of the woods. He said the America First Trade Memo emphasized fighting circumvention of Section 301 duties when China routes industrial supply chains through third countries, and that should worry Mexico.

"We can’t forget when we’re talking about North America. We are right now in USMCA review -- if you really look at this timeline we’re launching this with the threat of tariffs, the administration is going to take a very aggressive posture," he said. "Canada and Mexico need to be prepared to make major concessions, or they may get hit with the global supplemental tariff."

"That’s coming," he added. "I don’t think it’s a question of if, but when." He said he doesn't know if it will be late in the second quarter, or during the third quarter.

He said he hopes the analysis being done on the trade deficit is nuanced, looking at which goods are driving the deficit, country by country, and analyzing whether those sales do negatively impact manufacturing or other U.S. production. He said he also hopes that foreign governments and companies will be able to talk about these issues with the political appointees at Commerce -- the Commerce secretary nominee's hearing is next week -- so that the administration can have a tailored approach.

However, "given the timeline [of an April 1 report], and the tone and tenor of the comments," Ujczo said, it's likely to be a tariff that will apply to most imports at the start, and, if a country is to be exempted, or a sector is to be excluded, they'll have to "come to the altar" to ask for mercy. "That’s also consistent with their negotiating style," he said.

Ujczo said he isn't surprised that a re-evaluation of Section 232 tariffs, quotas and country exemptions is on the administration's agenda, even though "many thought they would be in the rear-view mirror." He said he's hopeful Canada and Mexico won't be hit with the tariffs again, since there have been significant changes in the market since 2018, including a prominent U.S. steel firm buying a Canadian company.