Rob Gillies
TORONTO (AP) – US President Donald Trump raised tariffs on Canadian goods to 35% last week, but key exemptions in Canada and Mexico protect most goods from penalty obligations.
Products compliant with the 2020 US-Mexico-Canada agreement trade agreement that Trump negotiated during his first term are excluded from tariffs.
Let’s take a look at Trump’s tariffs and exemptions in both countries.
Most Canadian exports have reached US tax exemptions
The Canadian central bank says 100% of energy exports and 95% of other exports are USMCA-compliant. Royal Bank estimated that almost 90% of Canadian exports appeared to have access to US market tax exemptions in April.
Canadian Prime Minister Mark Carney again said last week that the commitment to the US USMCA core would mean that the US average tariff rate for Canadian goods is one of the lowest, with more than 85% of Canada-US trade continuing to receive tariffs.
“We are pleased to announce that Flavio Volpe, president of the Auto Parts Manufacturers Association,” said: “It gives them a tough tariff headline, but it allows them to access what they need from us, so we are in a relatively good position.”
Canadian and Mexican companies can advocate for priority treatments under the USMCA based on where the product is manufactured.
“Headline news is a 35% tariff, but it’s somewhat targeted,” said John Manley, former Canadian minister of industry, finance, foreign minister and deputy prime minister of Canada.
Manly said Canada is fine despite economic uncertainty.
“There’s a lot of resilience I say. I remember that Canada’s economy is doing relatively well than most of us expected and there are no tariffs on either of our energy exports,” he said.
25% tariff on Mexican goods targets small amounts of trade
Last week, Trump said he would be in a 90-day negotiations with Mexico, one of America’s biggest trading partners. The current 25% tariff rate is down from the 30% he previously threatened.
However, that 25% applies only to the percentage of Mexico’s US transactions that are not covered by the USMCA. Shortly after speaking with Trump on Thursday, President Claudia Sheinbaum said in the “New Commercial World Order” that Mexico remains the best-positioned country for free trade agreements.
“There are no tariffs on what’s inside (USMCA) except that we already know. 25% of what’s outside the treaty,” Sinbaum said.
But Economic Secretary Marcelo Ebrard noted that under the USMCA, tariffs have not been paid on more than 84% of Mexico’s trade with the US.
Most imports from Canada and Mexico are still protected by the USMCA, but next year’s contracts are being reviewed. “I think the president is absolutely going to renegotiate the USMCA,” U.S. Secretary of Commerce Howard Lutnick said last month.
Preserving free trade agreements is important for Canada and Mexico.
“It would be incredible confusion to lose it, especially if Trump loses it to a tariff level that places him at 30%, 25% or 20%.
Over 75% of Canadian exports go to the US, and over 80% of Mexican exports go there.
Manly said the trade war is very high depending on how the USMCA risks are evident. “Business uncertainty is the enemy of decision-making,” he said.
Charging for access
In a series of recent agreements with other countries, Carney said the US is effectively charging access to its economy.
Manly said that Canada’s investment paper is very easy as it is rich in natural resources, has a skilled workforce, is open to immigration, and has free access to the US market, the world’s largest economy.
“If the latter point isn’t like that anymore, we still have everything else, but we have to really redevelop our investment papers to attract investments to Canada,” Manly said.
Trump has several sector-specific tariffs known as the 232 tariffs that are affecting it. There are carvings for Canadian and Mexican cars, but there is a 50% tariff on steel and aluminum imports, and a 25% tariff on automobile imports.
“Despite our advantages, certain Canadian major industries have been severely affected by US trade actions. These strategic sectors include automobiles, steel, aluminum, copper, pharmaceuticals, semiconductors and of course, coniferous wood,” Kearney said Tuesday. “It is clear that we cannot count or rely entirely on what was our most valuable business relationship for our prosperity.”
Associated Press Writer Fabiola Sánchez from Mexico City contributed to this report.
Original issue: August 5, 2025, 5:46pm EDT
