Tariff and Trade Policy: Mexico and Canada
2025 Q1 Key Developments in Tariffs & Trade Policy
• The one-month pause on US tariffs for Mexican and Canadian imports is set to expire.
• If the US proceeds with tariffs, Mexico and Canada are expected to impose counter-tariffs in response.
• Industry groups—including National Council of Textile Organizations (NCTO), CANAINTEX, and Canadian Textile Industry Association (CTIA)—have issued a joint statement urging an urgent trade resolution.
• Key demand: an immediate resolution to the de minimis threshold issue to prevent unfair advantages for non-USMCA countries.
Impact on the US Textile & Apparel Sector
• USMCA trade partnership supports a $20 billion two-way trade flow and sustains over 1.6 million jobs.
• Mexico & Canada are crucial export markets:
• Account for $12.3 billion (53%) of total US global textile exports.
• Textile components return as finished apparel under USMCA, reinforcing regional supply chains.
• Mexico’s textile and apparel exports to the US:
• Valued at $9 billion annually, ranking 4th in textiles and 6th in apparel.
• Canada’s textile and apparel exports:
• Sends $1.8 billion worth of textiles and apparel to the US and Mexico.
• The US receives 64% of Canada’s global textile exports, including specialized fabrics and PPE materials.
Industry Leaders’ Concerns
• Kim Glas (NCTO CEO) warns that penalty tariffs on USMCA partners will:
• Harm US textile manufacturers and Western Hemisphere supply chains.
• Give a competitive edge to China and other non-compliant Asian exporters.
• Potentially worsen the fentanyl crisis by allowing easier entry of illicit goods.
• Glas also demands an end to the de minimis tariff exemption for imports under $800, citing:
• Unfair advantages for Chinese exporters.
• Increased flow of illegal or substandard goods into the US market.
Financial & Consumer Market Risks
• S&P Global Ratings retail and consumer managing director Bea Chiem warns that:
• New tariffs could raise costs for fashion and retail businesses.
• Inflationary pressures make it difficult for brands to pass these costs to consumers.
• 24% of retail businesses and 19% of consumer brands already have negative credit outlooks, signaling financial instability.
• Previous tariffs (2018) were more manageable, but this round could pose greater risks to consumer products and retail companies.
New Tariff Measures & Global Trade Impact
• On February 1, President Trump announced:
• 25% tariff on Mexican and Canadian goods.
• 10% reduced tariff on Canadian energy products.
• Extra 10% tariff on Chinese imports, prompting China to impose counter-tariffs (10-15%).
• 25% tariff on steel and aluminum imports, affecting manufacturing costs.
Strategic Actions for Apparel Brands
• Advocate for a stable trade environment by engaging with policymakers and trade associations (NCTO, CANAINTEX, CTIA).
• Diversify sourcing & supply chains to mitigate tariff risks:
• Strengthen relationships with Central & South American textile partners.
• Expand sourcing from non-tariff regions while maintaining USMCA benefits.
• Monitor de minimis exemption changes and adjust e-commerce & import strategies accordingly.
• Adjust pricing & cost structures to minimize consumer price impact while maintaining margins.
• Stay updated on trade negotiations and potential policy shifts over the next election cycle.
Useful Links for Further Reading
• NCTO Official Statement: www.ncto.org
• US Trade Representative (USTR) Announcements: www.ustr.gov
• S&P Global Market Intelligence: www.spglobal.com
• USMCA Trade Agreement Details: www.trade.gov/usmca