Tensions are escalating in North American trade as U.S. President Donald Trump announced on Thursday that he will impose 25% tariffs on most goods from Canada and Mexico, set to take effect on Saturday, February 1. The move, which Trump framed as a response to illegal immigration, drug trafficking, and trade imbalances, has already prompted Mexico to prepare retaliatory tariffs, with a potential focus on U.S. agricultural products.
Mexico Responds with Retaliatory Tariffs
Mexico’s President Claudia Sheinbaum stated Wednesday that while she does not expect the U.S. to move forward with the tariffs, her administration has a plan in place if needed.
“We don’t think it’s going to happen,” Sheinbaum said. “And if it does, we have our plan.”
According to sources within the Mexican government, retaliatory tariffs ranging from 5% to 20% are being considered, particularly targeting pork, cheese, apples, grapes, potatoes, cranberries, and bourbon whiskey—industries that have a significant presence in states that voted for Trump. The automotive sector will initially be exempt from these countermeasures to avoid disruptions in Mexico’s most valuable manufacturing industry.
“Mexico has chosen these products because they have a big impact on regions that voted overwhelmingly for Trump,” a government source said.
Impact on U.S. Agriculture, Pork Industry at Risk
The trade conflict comes amid record-high U.S. pork exports to Mexico. From January to November 2024, pork sales reached 1.05 million metric tons, a 5% increase over the previous record pace in 2023. The export value climbed 10% to $2.33 billion, making Mexico the largest foreign market for U.S. pork producers.
Similarly, Canada remains a crucial trade partner for U.S. agriculture, with bilateral agricultural trade exceeding $33 billion in 2023. The U.S. holds an 81% market share in Canada’s pork import sector, underscoring the potential disruption these tariffs could create for meatpackers and producers relying on cross-border trade.
Commerce Nominee Signals Possible Negotiation Window
During a Senate confirmation hearing Wednesday, Howard Lutnick, Trump’s nominee for Commerce Secretary, suggested that Mexico and Canada could still avoid tariffs if they take stronger action on border security and fentanyl trafficking.
“If we are your biggest trading partner, show us the respect—shut your border,” Lutnick said. “And as far as I know, they are acting swiftly. If they execute it, there will be no tariff. And if they don’t, then there will be.”
However, Lutnick also backed Trump’s broader 10% universal tariff on all U.S. imports, arguing that the global trade environment treats the U.S. unfairly.
“We are treated horribly. They all have higher tariffs, non-tariff trade barriers, and subsidies,” Lutnick stated.
Economic Fallout and Future of USMCA
The move is expected to trigger economic consequences on both sides of the border. A report from J.P. Morgan Research suggested that a 25% tariff on Mexico and Canada would have a larger inflationary impact on U.S. prices than tariffs on China. The Tax Foundation estimated that Trump’s tariff policy could reduce U.S. GDP by 0.4%, levy $1.2 trillion in taxes over a decade, and eliminate 350,000 jobs.
Meanwhile, the tariffs raise uncertainty over the future of the U.S.-Mexico-Canada Agreement (USMCA), which is due for renewal in 2026. Having replaced NAFTA in 2020, the agreement sought to modernize North American trade rules, but a full-blown tariff war could strain its sustainability.
What’s Next?
With retaliatory tariffs looming, U.S. pork producers could face severe disruptions in their largest export market. The industry now waits to see whether diplomatic efforts can de-escalate tensions or if producers will need to prepare for a prolonged trade battle impacting supply chains and profitability.
Swine Web will continue monitoring this developing situation.
