The Importance Of The U.S., Canada, And Mexico Relationship

Tariffs on Canada and Mexico were paused for a month thanks to agreements between Canadian Prime Minister Justin Trudeau and Mexico President Claudia Sheinbaum. The 25% tariffs will be revisited in March with no guarantees that they will not be implemented. If they do go into effect, the damage to what may be the United States’ most vital relationships could be severe.

Geopolitical shifts have been pushing North American countries closer together as they seek to create a unified economic front. As a result, the strategic priority for many businesses on the continent is not offshoring, but nearshoring or friendshoring to neighboring countries to reduce supply chain vulnerabilities and costs. Because of this, many economic leaders argue that the relationship between the United States, Canada, and Mexico should be even stronger.

It has been well documented that tariffs could weaken this partnership and hurt the economy. The impact on prices has small businesses preparing for how they will purchase supplies and the impact that it will have on their customers. One business owner in California has even said that she is considering adding a tariff line item so customers can see what she would otherwise be charging them.

“If imposed, tariffs themselves would not solve our border problems, and instead would send prices soaring, costing the typical American family more than $1,000, with significant harm to U.S. manufacturers, farmers, and ranchers,” said John Murphy, Senior Vice President and Head of U.S. Chamber of Commerce in a statement.

The tariffs also are not in line with the United States-Mexico-Canada Agreement (USMCA), which the previous Trump Administration negotiated in 2020 to align production networks and boost intra-regional trade. The interconnectedness can help strengthen and grow industries, such as manufacturing, energy/renewables, and the automotive sector, which will make the region more self-sufficient and resilient against global disruptions.

“The Covid-19 pandemic laid bare the challenge of over-reliance on any one country for critical materials and products needed to protect citizens,” said Enrique Perret, Managing Director of the U.S.-Mexico Foundation. “Nearshoring can build on more than thirty years of tightly woven co-production and trade, but with an eye towards the future.”

Proponents of nearshoring argue that relocating manufacturing and supply chains closer to home, companies can be better positioned to respond to market demands and reduce reliance on distant suppliers in Asia. With that in mind, President Trump has an opportunity to work with Canada’s next prime minister and President Sheinbaum to steer North America towards a shared identity centered on economic integration, mutual governance, and a proactive response to global challenges. Getting the North American identity right will be key to America’s economic and national security future – with a lot on the line for business owners of all sizes.