High duties on imports from Canada, Mexico and China raise problems for international supply chains
Update 7 March 2025:
On 6 March, the US government agreed to delay implementing 25% trade tariffs on goods covered by the United States-Mexico-Canada Agreement (USMCA) free trade agreement until 2 April. Retaliatory tariffs threatened by Canada and Mexico are on hold as a result, while further negotiations proceed.
The USMCA was implemented during Trump’s first term in office in 2020, replacing the North American Free Trade Agreement (NAFTA). Estimates suggest the exemption will cover about half of US imports from Mexico, and around 40% of imports from Canada. Potash imports to the US, which fall outside USMCA, will also attract a lower tariff of 10%. This adjustment came after Trump had already exempted US Automakers from the tariffs for a month.
The chemical industry across North America has immediately raised alarms at US president Donald Trump’s broad new trade tariffs of 25% on goods imported from Canada and Mexico, which went into effect on 4 March and are prompting retaliatory tariffs.
The Alliance for Chemical Distribution is ‘concerned about the overall consequences increased tariffs – and retaliatory tariffs – will have on […] the wide range of US manufacturing sectors supported by the chemical distribution industry, and American consumers as a whole,’ stated the trade group’s president, Eric Byer.
‘As we navigate these changes in trade policy, ACD encourages the administration to recognise that the impact of these tariffs will only magnify downstream, placing a strain on our supply chain and our ability to grow our economy,’ Byer continued.
The American Chemistry Council, which represents US chemical companies, pointed out that chemical products made in the US often cross the Canadian and Mexican borders several times, adding value and supporting other US manufacturing supply chains. ‘A 25% duty added each time such products cross the border will make domestic production of these products more expensive, likely increasing prices for consumers, especially when our producers are facing increasing competition and unfair trading practices from other countries,’ the trade group added.
Everybody is going to be rearranging their supply chains at the same time to try to avoid these tariffs from our three largest trade partners
The American Coatings Association (ACA) also warned that the tariffs will introduce ‘disruptions and increased costs’ into the production of essential consumer products, including medical devices and pharmaceuticals, food production equipment and grocery items. Canada and Mexico are the US coatings industry’s largest trading partners, valued at $1.26 billion (£980 million) and $815 million, respectively, ACA said.
Al Greenwood, deputy editor for energy and chemicals consulting firm ICIS, suggested that supply chain disruptions and logistical disruptions will impact chemical companies, plastic processors, and beyond.
‘Everybody is going to be rearranging their supply chains at the same time to try to avoid these tariffs from our three largest trade partners,’ Greenwood tells Chemistry World. ‘And once the supply chains are rearranged, they’re probably going to be longer and more complicated. Get ready for disruptions, delays and extra costs,’ he warns.
‘Immediate challenges’ posed
Meanwhile, the Chemical Industry Association of Canada (CIAC) has expressed ‘deep concern’ about the new tariffs, saying they pose ‘immediate challenges’ to the economies of both countries and noting that the chemistry and plastics sectors exemplify mutually beneficial trade relationship with C$115 billion in trade between the two countries.
‘This approach threatens the competitive edge that North America has enjoyed in the global market, hindering our ability to innovate and deliver solutions for the long-term viability of both the American and Canadian economies,’ stated CIAC president, Greg Moffat.
Also on 4 March, 10% tariffs on goods imported to the US from China came into effect. Trump said he levied the new duties against these top US trading partners because they haven’t sufficiently worked to prevent supplies of fentanyl and its precursor chemicals from entering the US.
In response, Canada immediately announced that it would impose 25% tariffs on $30 billion in goods imported from the US, and said those tariffs might be expanded in the coming weeks. Mexico’s president Claudia Sheinbaum said her government might seek other trade partners, and she indicated her administration would announce its specific countermeasures against the US on 9 March.
For its part, China quickly announced new tariffs on US food and agricultural goods, including a 15% tax on US chicken, wheat, corn and cotton, and a 10% tariff on sorghum, soybeans, pork, beef, seafood, fruit, vegetables and dairy products, which are slated to take effect on 10 March.
‘If war is what the US wants, be it a tariff war, a trade war or any other type of war, we’re ready to fight till the end,’ stated Chinese spokesperson Lin Jian at a press conference on 4 March.
During a same-day address to Congress, Trump indicated that he is willing to escalate the trade wars and that US reciprocal tariffs will kick in on 2 April. ‘If they tariff us, other countries, we will tariff them – that’s reciprocal back and forth – whatever they tax us, we will tax them,’ the president stated. ‘If they do non-monetary tariffs to keep us out of their market, then we will do non-monetary barriers to keep them out of our market.’
However, the next day, Trump granted US carmakers a one-month exemption on the Mexican and Canadian tariffs.
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