A trade rift is brewing between Mexico and Canada, sparked by U.S. President-elect Donald Trump’s looming threat of sweeping 25% tariffs on both countries. With Trump citing concerns over illegal immigration and fentanyl smuggling, the two nations have taken divergent paths to defend their economic ties with the U.S., escalating tensions in a region already navigating complex trade dynamics.
Canada Seeks to Sideline Mexico
Canada has wasted no time distinguishing itself from Mexico in the eyes of the U.S. Trump administration. During a dinner at Mar-a-Lago, Canadian Prime Minister Justin Trudeau reportedly assured Trump that Canada’s northern border is vastly different from Mexico’s southern one, portraying Canada as a more reliable trading partner.
Ontario Premier Doug Ford has gone a step further, proposing a bilateral trade agreement between the U.S. and Canada that would cut Mexico out entirely. This bold proposal reflects Canada’s growing frustration with Mexico’s perceived leniency on border issues and its potential role as a backdoor for Chinese imports to North America.
Further cementing its alignment with the U.S., Canada recently imposed a 100% tariff on Chinese-made electric vehicles, echoing U.S. and European Union policies aimed at curbing reliance on Chinese manufacturing. Canadian officials have also emphasized their shared commitment with the U.S. to counter China’s economic influence.
Mexico Defends Its Position
In stark contrast, Mexican President Claudia Sheinbaum has struck a defiant tone. Responding to Canada’s criticism, she highlighted Mexico’s cultural and economic contributions, asserting that her country deserves respect from its trading partners. However, Sheinbaum’s approach to Trump’s tariff threats has been less consistent.
After initially vowing retaliatory tariffs, Sheinbaum softened her stance following a call with Trump. She expressed optimism about collaboration on migration and drug-trafficking concerns—issues central to Trump’s rationale for the punitive tariffs. Mexico’s balancing act reflects the complexity of its position: it must defend its sovereignty while maintaining its crucial trade relationship with the U.S.
A Shifting Power Dynamic in North American Trade
The emerging divide between Mexico and Canada is more than just political posturing—it’s a sign of how the dynamics of North American trade are shifting in response to U.S. pressure. While Canada has aligned itself more closely with U.S. policies on China and trade, Mexico’s position is more precarious, as it juggles domestic challenges and a turbulent relationship with its northern neighbors.
For organisations, the implications are significant. The potential fragmentation of the USMCA—or its replacement with bilateral agreements—would upend trade flows, increase costs, and force businesses to rethink their sourcing strategies. Companies dependent on North American trade must prepare for more uncertainty ahead, exploring diversified supply chains and building contingency plans for potential tariff impacts.
This moment demands not just adaptation but leadership. Businesses that can navigate these political headwinds and anticipate the ripple effects of policy shifts will emerge stronger. The challenge isn’t just responding to change—it’s staying ahead of it.
