Big Chunk of North American Trade Remains Exposed to Tariffs
The Trump reprieve applies to products covered under a 2020 pact, which leaves a lot of goods still subject to the new 25% tariff levels
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https://www.wsj.com/economy/trade/b...74?st=FWbjuJ&reflink=mobilewebshare_permalink
“… Because USMCA rules are so complicated, businesses have sometimes chosen to pay a tariff on a given product instead of expending time and money to figure out whether it is USMCA-compliant, according to trade experts.
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The analytics firm Trade Partnership Worldwide estimated that in 2024, 50% of Mexican exports and 38% of Canadian exports entered the U.S. duty-free under USMCA. These products include cars, trucks and auto parts from either country. Also falling under this category are Canadian rapeseed oils, chocolates, beef and engines; and Mexican television sets, air conditioners, avocados and tomatoes.
About 40% of U.S. imports from Canada and Mexico fell outside USMCA but still passed through duty-free: The U.S. imposes no tariffs on a host of products, regardless of the supplier country.
… The 25% tariff that Trump implemented on Tuesday is likely high enough to prompt many businesses to do the legwork to figure out whether their products fit under USMCA, said Ed Gresser, a former trade negotiator and vice president of the Progressive Policy Institute.
… TPW estimates that each day the U.S. imports $1 billion of goods from Canada and Mexico that faced no tariffs even without USMCA.
That means companies could now be on the hook for $250 million a day in new tariffs.
The White House said Thursday a lower 10% tariff would apply to Canadian energy products and potash from either country that falls outside USMCA.
That means that the majority of $124 billion of Canadian energy exports to the U.S. last year could be subject to higher tariffs under the new regime.
Businesses didn’t bother to claim USMCA for $78 billion in Canadian crude oil that came into the U.S. last year because the products faced only 0.1% tariffs. Companies could now begin to make claims with more money at stake, although if they don’t because of resource and time considerations, the products would be subject to a 10% tariff.
About $16 billion of other primarily Canadian energy products came in tariff-free and outside of USMCA; that would now be subject to 10% tariffs.
About $3 billion of Canadian potash entered tariff-free and outside of USMCA, according to TPW, and similarly would now be subject to 10% tariffs.
Gresser said that even U.S. Customs and Border Protection officials will be struggling with implementation, which involves understanding the changes and reconfiguring electronic databases appropriately.
“A mountain of legal challenges and headaches are ahead,” he said. …”
