The Effect of Trump Tariffs on Mexico and Canada

Lisandra Flach and Andreas Baur

No 70, EconPol Policy Brief from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

Abstract: Key MessagesUS President Donald Trump has recently announced 25% tariffs on US imports from Canada and Mexico. A simulation analysis using a quantitative framework shows that Trump’s tariffs would hit the manufacturing sector of the US’s North American neighbors particularly hard.In the event that Mexico and Canada impose symmetric retaliatory tariffs, all sectors of the economy (services, agriculture, and manufacturing) would incur permanent value-added losses.In Mexico and Canada, manufacturing has the largest decline in value added, 13% and 14%, respectively.For the US economy, agriculture has the largest decline in value added (-2.39%), but other sectors of the economy also incur permanent losses.In the event of retaliation, Canada would have to expect a long-term permanent decline in total exports of up to 28%, while Mexico could see a drop of more than 35% and the US of 22%.

Date: 2025
New Economics Papers: this item is included in nep-cmp, nep-int and nep-inv
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