Updated: Tariffs paused on Canada, Mexico

White House Press Secretary Karoline Leavitt announced Friday, Jan. 31, in a news briefing that the U.S. would begin imposing 25 percent tariffs on goods imported from Canada and Mexico and a 10 percent tariff on imports from China starting Feb. 1.

The three countries represent more than one-third of the goods and services that are imported to or bought from the United States, according to the New York Times. The governments of all three countries have vowed to levy tariffs of their own on U.S. goods entering their countries.

Rationale for the tariffs

The White House released more information about the tariffs Saturday, Feb. 1, saying the move is meant to address the "extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl," which "constitutes a national emergency under the International Emergency Economic Powers Act (IEEPA)."

The administration says China has failed to take actions to stem the flow of precursor chemicals to known criminal cartels and shut down money laundering by transnational criminal organizations, Mexican drug trafficking organizations have "an intolerable alliance with the government of Mexico" and "a growing presence of Mexican cartels [is] operating fentanyl and nitazene synthesis labs in Canada."  

Rates and exceptions

According to the Feb. 1 executive orders, all goods from Canada, with the exception of energy products, and Mexico were to be subject to an additional 25 percent tariff starting 12:01 a.m. Eastern time Feb. 4, unless those goods were loaded onto a vessel at the port of loading or in transit on the final mode of transport prior to entry into the United States before 12:01 a.m. Eastern time Feb. 1 if the importer certifies to U.S. Customs and Border Protection as specified in the Federal Register notice. 

Energy resources from Canada were to be taxed at a 10 percent rate rather than the 25 percent rate. 

However, the Trump administration paused the tariffs on Canada for 30 days following a call with Canadian Prime Minister Justin Trudeau on Feb. 3 during which he vowed to increase border security, according to reports.

Also, following a call the morning of Feb. 3 between Mexican President Claudia Sheinbaum and President Donald Trump, the U.S. has agreed to put its planned tariffs on Mexico on hold for a month as the Mexican government has agreed to send 10,000 national guard troops to the border to address drug trafficking, while the U.S. will work to stop weapons trafficking into Mexico. 

An additional 10 percent duty will be levied on imports from China, effective Feb. 4, as well, unless the goods were loaded before Feb. 1.  

Section 232 and 301 reviews

The actions also are not related to the directive Trump gave his incoming cabinet to review the Section 232 tariffs on steel and aluminum imports; Section 301 tariffs on Chinese imports, including the tariff exclusions on shredder wear parts, set to expire May 31, 2025, and export control measures; and the United States-Canada-Mexico Agreement, a review of which that is scheduled to begin in July of next year, and prepare policy recommendations for the White House by April 1.

Aluminum industry impact

The potential impact of the threatened tariffs on the aluminum market was a topic of discussion at the S&P Aluminum Symposium in Fort Lauderdale, Florida, Jan. 26-28, as the U.S. aluminum industry counts on Canada for nearly 70 percent of its prime aluminum imports, according to Karen Norton, principal aluminum analyst at S&P Global Commodity Insights.

Rich Burchett, chief metals officer at Commonwealth Rolled Products, which operates a rolling mill in Lewisport, Kentucky, said tariffs have pros and cons. If they inflate the price of aluminum products produced in the U.S., it could lead manufacturers to consider other materials, he added.  

Jeff Turner, rod sales, OEM division, Southwire, headquartered in Carrollton, Georgia, said his company had been holding more material in inventory because of the threatened tariffs.  

Burchett said Commonwealth had been running through various contingencies “because we don’t know what tomorrow is going to bring.” However, he added that the company had not been stocking up on material as it didn’t see a big supply chain disruption as a result of the possible tariffs. Rather, he suspected that more primary aluminum could enter the U.S. from the Middle East.

“There will be some volatility as those actions are taken," he said.

Turner said Southwire also was investigating contingencies and noted the volatility that was likely to occur if the Trump administration implemented the tariffs as planned Feb. 1.

Renato Bacchi, executive vice president and chief commercial officer at Pittsburgh-based Alcoa, said tariffs would impact aluminum price and flows. “They might make flows less logical and optimal, and that has a consequence in price," Bacchi said.

He added that the tariffs could lead to growth in U.S. aluminum imports from the Middle East and India, while Canadian aluminum could be sold into Europe. That would result in low-carbon aluminum from Canada that used to enter the U.S. with short transit times shifting to high-carbon aluminum entering the U.S. with longer transit times, a situation he described as “not optimum.”

The added pressure that tariffs will place on U.S. consumers is a concern shared by Matt Rohm, CEO of St. Louis-based MX Holdings, a global leader in the purchasing, processing, and manufacturing of aluminum through its companies that include Metal Exchange and Pennex. He said financially healthy consumers are who drive growth for the aluminum industry.

“Rising input costs and tariffs will add price pressure on consumers,” he said, noting that 50 to 75 percent of the potentially higher prices from tariffs are passed onto consumers. 

"The United States is a powerhouse in aluminum production and fabrication against global competitors. That strength relies on imports of upstream aluminum, both smelted and scrap, from Canada," says Charles Johnson, president and CEO of the Aluminum Association, Arlington, Virginia, in a statement released Feb. 1. "The Aluminum Association welcomes President Trump’s efforts to secure our borders and support American manufacturing by tackling unfair global trade. During his first term, President Trump was early to recognize the genuine threat that nonmarket actors pose to U.S. manufacturing industries like ours. This led to more than $10 billion in industry investment since 2016. This investment requires an enormous amount of metal, much of which the U.S. industry must import from within North America.

"To ensure that American aluminum wins the future, President Trump should exempt the aluminum metal supply needed for American manufacturers, while continuing to take every possible action at the U.S. border against unfairly traded Chinese aluminum. This is consistent with action his administration wisely took during his first term. Then, we should work to keep unfairly traded aluminum out of the region by harmonizing tariffs with our North American trading partners.”

Other associations respond

Robin K. Wiener, president of the Recycled Materials Association (ReMA), Washington, also commented on the tariffs, saying, “The Recycled Materials Association has long supported free and fair trade policies, including the United States-Mexico-Canada Agreement (USMCA) that entered into force in 2020. While we understand the Trump Administration must focus on solutions to address major problems at the border, such as fentanyl trafficking, the imposition of tariffs on our North American trading partners will significantly disrupt U.S. manufacturing and recycling operations that depend on recycled material inputs.