A crucial question looms over Donald Trump’s threatened 25% tariff on heavy-duty trucks: will the United States’ closest trading partners, Canada and Mexico, be granted an exemption? The answer will have enormous consequences for the North American auto industry and will serve as a major test of the new United States-Mexico-Canada Agreement (USMCA).
According to Neil Shearing, an economist at Capital Economics, the stakes are highest for Mexico, which supplies a massive 78% of all US heavy truck imports. Canada accounts for another 15%, meaning the tariff would primarily impact the USMCA bloc. If no exemption is provided, the economic blow to Mexico’s manufacturing sector would be severe.
Historical precedent offers little comfort. Shearing notes that most previous product-specific tariffs enacted by the Trump administration have not included USMCA exemptions. This suggests that compliance with the trade pact may not be enough to shield Canada and Mexico from the new duties, a development that would undermine the spirit of the recently negotiated agreement.
The uncertainty over the USMCA’s application is part of a wider trade storm that has also engulfed Europe. The truck tariff has been condemned by the German auto industry as “incomprehensible,” while the UK is reeling from a separate threat of a 100% duty on its pharmaceutical exports.
The administration’s strategy appears to be focused on leveraging tariff threats to encourage domestic production. This “America First” approach prioritizes onshoring manufacturing above all else, including honoring the nuances of existing trade deals. The decision on the USMCA exemption will therefore be a clear signal of the White House’s priorities and could redefine the economic relationships within North America.
