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Increase in tariffs on Canadian and Mexican imports to impact machinery industry

• On March 4, 2025, the United States imposed a 25.0% tariff on goods imported from Canada, which applies in addition to other duties or fees that are in place, with limited exceptions for machinery products. However, as of March 6, 2025, all goods compliant with the United States-Mexico-Canada Agreement (USMCA) will be exempt from tariffs until April 2, 2025.
• After the tariff took effect, Canada immediately imposed 25.0% tariffs on goods imported from the United States. Mexico also announced plans to impose retaliatory tariffs and non-tariff measures on imports from the United States later this month.
• On March 12, the United States raised tariffs on steel and aluminum imports from all countries to 25.0%, including Canada and Mexico.
• According to the US International Trade Commission, the top US imports from Canada in 2023 were petroleum products, metals, and machinery. Bank of America analysts report that industrial machinery manufacturers, such as Caterpillar and John Deere, which are sensitive to commodity costs and global supply disruptions could face disruptions as a result of tariffs.
• Tariffs on imported Canadian and Mexican goods are expected to increase equipment and machinery prices, and retaliatory tariffs are expected to disrupt domestic suppliers. Tariffs are also expected to create supply chain disruptions as restructuring occurs.

Canada and Mexico tariffs to negatively impact the electronics industry

• On March 4, 2025, the US imposed a 25.0% tariff on goods imported from Mexico and Canada, which applies in addition to other duties or fees that are in place, with limited exceptions for electronics products. However, as of March 6, 2025, all goods compliant with the United States-Mexico-Canada Agreement (USMCA) will be exempt from tariffs until April 2, 2025.
• After the tariff took effect, Canada immediately imposed 25.0% tariffs on goods imported from the United States. Mexico also announced plans to impose retaliatory tariffs and non-tariff measures on imports from the United States later this month.
• According to the US Census Bureau, the United States imported $87.1 billion in electronics, or 18.2% of goods, from Mexico in 2024, and $11.2 billion in electronics, or 2.3% of goods, from Canada. Many electronics manufacturers are based in Mexico due to the logistical advantages and low labor costs, and 89.0% of Mexican exports of electrical and electronic equipment are destined for the United States.
• Electronics retailers are warning of higher prices with the new tariff as upstream vendors pass along higher costs. Best Buy CEO Corie Barry reported that Mexico is the second largest source for products sold by their company, and price increases are expected.
• Due to the integrated nature of the electronics production chain in North America, the impact of tariffs will result in supply chain disruptions and higher costs as supply chains are restructured to mitigate tariff-related costs. According to the Joint Economic Committee, computers, phones, and other electronics could see price increases of up to 11.0%.

Inflation climbs above 3.0% for the first time in seven months

• In January, the Consumer Price Index (CPI) 12-month inflation rate, the most commonly used measure of inflation, rose by 0.1% to 3.0%, the highest it has been since June 2024.
• This uptick in inflation follows cuts to interest rates which may have added to consumer demand, fueling higher consumer prices.
• Additionally, the threat of impending tariff hikes has driven preemptive stockpiling by importers, adding to demand and price growth across a range of industries in the United States.
• While inflation is still low relative to previous years, sustained recent increases in inflation and the potential effects of tariffs, such as the recently implemented 10.0% on all Chinese goods, mean prices are still rising at a faster-than-normal pace.