Canada, U.S. should eye own trade deal if no Mexican tariffs on China
Ontario Premier Doug Ford on Tuesday suggested Mexico “shouldn’t have a seat at the table” in upcoming North American free trade talks if it doesn’t match Canadian and American tariffs on Chinese imports — and that Canada and the U.S. should focus on a new, bilateral deal instead.
Ford’s statement comes as North America braces for the return of U.S. president-elect Donald Trump to the White House and a scheduled review in 2026 of the Canada-United States-Mexico Agreement (CUSMA), which replaced NAFTA during Trump’s first term.
Trump, and now Ford, have accused Mexico of allowing Chinese companies to bypass CUSMA rules and export vehicles and parts into the U.S. and Canada through Mexican-built manufacturing plants.
“If Mexico won’t fight transshipment by, at the very least, matching Canadian and American tariffs on Chinese imports, they shouldn’t have a seat at the table or enjoy access to the largest economy in the world,” Ford said in the statement issued by his office.
“Instead, we must prioritize the closest economic partnership on earth by directly negotiating a bilateral U.S.-Canada free trade agreement that puts U.S. and Canadian workers first.”
Canada joined the U.S. earlier this year in slapping 100 per cent tariffs on Chinese imported electric vehicles and 25 per cent levies on Chinese steel and aluminum. Ottawa is undergoing further consultations on whether to expand the tariffs to other Chinese imports. Mexico has not followed suit.
Chinese automakers such as BYD — one of the largest in the world — are seeking to build manufacturing plants in Mexico, where a number of American companies are already building their vehicles at a lower cost. The fear is that those Chinese companies can then take advantage of CUSMA’s duty-free import rules and flood the North American market with Chinese cars while avoiding the U.S. and Canadian tariffs.
CUSMA’s rules of origin clause requires higher levels of North American parts in vehicles sold in the three countries compared with NAFTA, which Trump has said China is also trying to exploit.
Speaking to reporters at an unrelated press conference in Barrie on Tuesday, Ford expanded on his statement and pointed to a trade imbalance between Ontario and Mexico, which he claimed exports the vast majority of $40 billion in annual two-way trade with his province.
“If Mexico wants a bilateral trade deal with Canada, God bless them,” Ford said. “But I’m not going to be drawn down with these cheap imports, taking men and women’s jobs from hard-working Ontarians.”
Asked about Ford’s comments during a press conference alongside New Brunswick Premier Susan Holt, Prime Minister Justin Trudeau said there has been “varying degrees of concern” about Chinese overcapacity and unfair trade practices, and suggested continued cooperation is the best way to confront it.
“We’re going to continue to work with partners like the United States, and hopefully Mexico as well, to make sure that we are united in our desire to protect good jobs” as well as environmental and labour concerns, he said.
Canada has sought to follow the Americans’ lead on trade issues when it comes to China, particularly Chinese EVs. Last week, Deputy Prime Minister and Finance Minister Chrystia Freeland said that unified stance will give Canada a “firm foundation” in upcoming U.S. trade negotiations.
It could also help make the case for Canada to avoid Trump’s promise of a blanket 10 per cent tariff on all foreign imports to the U.S.
Trump has taken aim at Mexican imports in particular over the Chinese auto issue, as well as immigration. At a rally in North Carolina earlier this month, Trump said he will impose a 25 per cent tariff on everything imported from Mexico “if they don’t stop this onslaught of criminals and drugs coming into our country.”
Mexico’s Economy Minister Marcelo Ebrard suggested on Monday that the Mexican government would “have to” retaliate with its own tariffs on American goods if Trump follows through, which he said would bring “a gigantic cost for the North American economy.”
Last month, Trump vowed to impose tariffs of at least 200 per cent or more on all vehicles imported from Mexico — which would hurt American automakers in the short term — and said he could levy Chinese companies who operate in Mexico and bypass CUSMA rules as high as 1,000 per cent.
Trump would likely not need Congress to impose these tariffs, as was clear in 2018, when he imposed them on steel and aluminum imports from Canada and other countries without going through lawmakers by citing Section 232 of the Trade Expansion Act of 1962. That law, according to the Congressional Research Service, gives a president the power to adjust tariffs on imports that could affect U.S. national security, an argument Trump has made.
Much of Trump’s ire toward CUSMA has been focused on protecting the American auto industry and ensuring China can’t exploit its rules of origin clause and benefits for North American imports.
But Mexico could further threaten its place within CUSMA if Mexican President Claudia Sheinbaum pushes through her predecessor Andrés Manuel López Obrador’s policies aimed at eliminating independent regulatory and oversight bodies, and laws the U.S. government says could reduce the independence of the judiciary — both of which are required under the trade agreement.
López Obrador paused relations with the U.S. and Canadian embassies in Mexico after both countries criticized the judicial reforms.
