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United States imposes sweeping tariffs on Canada and Mexico

• In February 2025, the United States announced 25.0% tariffs on imports from Canada and Mexico, which took effect on March 4, 2025.
• The tariff by the United States applies to all merchandise imported for consumption and applies in addition to other duties or fees that are in place. However, imported goods covered under 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.
• This market sources goods from an affected country. As such, ProcurementIQ will continue to monitor developments in this space and update analysis accordingly.

United States announces additional tariffs on China

• In February 2025, the United States announced 10.0% tariffs on imports from China, which took effect on February 4, 2025. In late February 2025, the United States announced an additional 10.0% tariff on imports from China, which took effect on March 4, 2025.
• The tariff plan applies to all merchandise imported for consumption and applies in addition to other duties and fees that are in place, with limited exceptions.
• In response, China announced a 15.0% tariff on products such as coal and natural gas, as well as a 10.0% tariff on crude oil, agricultural machinery, pickup trucks, and large cars. The tariff executive orders indicate retaliatory tariffs could lead to further escalation in rates.
• One of the three executive orders passed suspended the Section 321 de minimis shipment exemption (often applying to e-commerce packages), subjecting all shipments under $800 to relevant tariffs. However, on February 7th, this executive order was suspended until new systems are put into place to properly process and collect tariff revenues.
• This market sources goods from China. As such, ProcurementIQ will continue to monitor developments in this space and update analysis accordingly.

Homebuilding falls as interest rate cuts fail to reduce mortgage rates

• In the last three months, the number of new housing construction projects fell by 6.5%, which has translated to a 1.8% decrease in residential construction spending.
• Sustained high interest rates have been depressing demand for residential construction because consumers face higher financing costs when purchasing a new home or investing in renovations.
• While the Federal Reserve (Fed) cut the federal funds rate, the interest rate banks face when borrowing money from each other, in recent months, these cuts have not translated to significantly lower mortgage rates for consumers.
• Instead, increasing perceptions of general economic risk among banks have led them to raise mortgage rates to 6.9%, a significant departure from the federal funds rate.
• However, a study by Hines Group indicates that there is currently a 3.2-million-unit shortage in the US housing market, meaning declining interest rates are likely to translate to continued increases in homebuilding due to this solid underlying demand.