After weeks of uncertainty, President Trump on March 4 invoked the International Emergency Economic Powers Act (IEEPA) to impose 25% tariffs on all goods from Canada and Mexico, with a 10% tariff applied to Canadian energy exports. An additional 10% duty was also imposed on all imports from China, bringing the average applied U.S. tariff on Chinese goods to nearly 40%. Combined, the new tariffs hit approximately 45% of U.S. imports.
And Off Again (Partly). However, after two days of industry pushback and sharp stock markets declines, the White House partially relented on March 6, pausing the tariffs on all imports from Canada and Mexico that comply with USMCA’s preferential terms. A White House official said that roughly 50% of imports from Mexico and 62% of imports from Canada are not compliant, with the vast majority of these entering the U.S. market at a 0% most-favored nation (MFN) duty rate. . (White House fact sheet, southern border EO, northern border EO.)
While USMCA’s terms provide for duty-free treatment for compliant trade within North America for more than 99% of tariff codes, it is unclear how challenging it will be for firms to avoid the new duties by shifting from claiming MFN- to USMCA-treatment. As the Wall Street Journal notes, affected “products include computers, medical equipment, phones and beer [as well as petroleum]. Those goods will now face 25% tariffs, White House officials said. Companies never sought to comply with the USMCA rules because there was no tariff benefit associated with compliance.”
President Trump signaled this arrangement will last only until April 2, when he says his “reciprocal tariff” plan will be launched. An official added that no duties collected in recent days would be refunded.
“Increasing Economic Pain.” U.S. Chamber Executive Vice President and Chief Policy Officer Neil Bradley expressed the business community’s opposition on the eve of the tariffs, saying:
“American families and businesses are struggling with high costs. It’s one of the top issues that they want policymakers to address. The Chamber supports the administration’s efforts to advance pro-growth policies like fewer regulations and less taxation that will grow our economy and expand opportunity; and to fix serious problems like our broken border and stopping the flow of fentanyl in this country.
“We also want to work together to keep costs down, but tariffs will only raise prices and increase the economic pain being felt by everyday Americans across the country. We urge reconsideration of this policy and a swift end to these tariffs.”
Retaliation Ricochet: In response, Canada imposed 25% tariffs on about $20 billion worth of U.S. exports on March 4, while another tranche of tariffs—set to hit about $100 billion of U.S. exports— was slated to come into effect in three weeks. The list of U.S. exports hit by Canada’s 25% duty includes poultry, meat, and dairy products. Mexico was preparing to announce retaliatory measures before the White House’s partial reversal. China retaliated by slapping 10%-15% tariffs on select U.S. agricultural exports and adding 15 U.S. companies to its export control list and placing 10 more companies on its Unreliable Entities List (UEL).
Small Businesses Speak Out: The U.S. Chamber represents businesses of all sizes that were immediately affected by the tariffs, forcing them to raise prices or risk going out of business entirely. This week, the Chamber documented a range of small businesses that would be negatively impacted by the measures. Some examples include:
Yesi Noyola, owner, Kandy Queen Dulceria, North Richland Hills, Texas:
“I’m afraid we’ll have to close our doors because people won’t have the money to come and shop for things like piñatas and all the traditional Mexican candy that people love.”
Ashli Watts, President and CEO of the Kentucky Chamber of Commerce:
“New tariffs on Canada and Mexico will put unnecessary pressure on Kentucky businesses and families. As a state that thrives on trade, we know firsthand how these policies disrupt supply chains, increase costs, and threaten jobs. We’ve seen it before—when Kentucky’s bourbon industry was hit by retaliatory tariffs, it lost nearly $600 million in exports. These policies have real consequences. We urge policymakers to support free enterprise and trade policies that allow Kentucky businesses to compete and grow. Our economy depends on it.”
The Chamber continues to engage with administration officials and members of Congress to press for a complete termination of the tariffs on Canada and Mexico and a more strategic approach to trade worldwide. For further information, please contact Senior Vice President and Head of International John Murphy (jmurphy@uschamber.com).