Washington - In a development with immediate market implications, the White House said on Friday that products moved under the US-Mexico-Canada Agreement will largely be spared from a newly signed 10% global tariff. The clarification follows a pivotal U.S. Supreme Court decision that invalidated the President's prior use of emergency powers to impose heftier duties.
The administration's concession eases what had become a growing "tax wall" confronting North American trade, but it also concentrates political pressure around the next scheduled USMCA review in 2026.
How the tariff math changes
Before the latest measures, certain products that did not qualify under trade rules faced steep penalties - characterized as "hammer" tariffs - with rates reaching 25% for Mexico and 35% for Canada. The new policy replaces that patchwork of levies with a 10% universal tariff from which USMCA-covered shipments will generally be excluded.
Economists at Desjardins and Grupo Financiero Base have calculated that this reconfiguration actually lowers the short-term effective tariff burden for the two trading partners. Their estimates indicate a modest decline in the effective rate, from about 3.7% to slightly lower for Canada and from around 4.4% to slightly lower for Mexico.
Market participants and analysts have highlighted the practical significance of the exemption for supply chains. The Automotive and Energy sectors are singled out as beneficiaries because the carve-out helps preserve cross-border flows of oil and critical manufacturing components without inducing large price shocks.
Political and legal dynamics - a shift in tools, not intent
Trade specialists caution that the Supreme Court setback strips the President of a particular enforcement mechanism but does not eliminate other administrative options. White House officials have signaled a pivot to Section 301 probes - the instrument used during the earlier trade actions on China - alongside Section 232 investigations tied to national security.
"The president didn’t lose his leverage, he just lost a lever," said trade lawyer Barry Appleton. Market observers worry the administration could employ these country-specific investigatory tools in a way that attempts to circumvent both Congress and judicial review.
USMCA review - sustained policy risk for currencies and markets
Looking ahead, the most consequential risk for the Mexican peso and the Canadian dollar is the upcoming 2026 review of the USMCA. Reports that the President has questioned aides about the continued necessity of the pact, combined with the recent judicial loss, have intensified speculation about possible radical changes to the agreement.
Diego Marroquin of the Center for Strategic and International Studies warned that current dynamics "are making it more painful for Mexico and Canada to trade with the US even if they comply with the agreement." That view signals why investors may keep a persistent "USMCA Risk Premium" priced into assets tied to North American trade relationships.
For now, the White House exemption offers immediate relief to cross-border supply chains and to industries sensitive to tariff-driven cost shocks. At the same time, shifting enforcement strategies and a contentious bilateral review process mean policy uncertainty will likely remain an important market consideration.