Trump Tariffs on Canada and Mexico Put These ETFs in Focus
On Nov. 25, 2024, President-elect Donald Trump announced plans to impose a 25% tariff on imports from Canada and Mexico, citing the need to curb drug trafficking, particularly fentanyl, and illegal migration. This move, set to take effect via an executive order on Jan. 20, 2025, appears to contradict the United States-Mexico-Canada Agreement (USMCA), which promotes duty-free trade among the three nations.
More than 83% of Mexican exports and 75% of Canadian exports head to the United States, making these tariffs a huge threat to their economies. The tariffs could also disrupt Asian auto and electronics manufacturers that rely on Mexico as a low-cost production hub for U.S. markets.
The move puts focus on First Trust S-Network Future Vehicles & Technology ETF CARZ, which might see a decline in price.
In addition to the Mexico and Canada tariffs, Trump proposed an “additional 10% tariff” on imports from China, underscoring his commitment to his “America First” agenda. This move is likely to escalate tensions with the United States’ largest trading partners and boost small-cap U.S. ETFs like iShares Russell 2000 ETF IWM as the operations of small-cap companies are more closely tied to the domestic economy. The IWM ETF hit an all-time high on Nov. 25, 2024.
The proposed tariffs could violate the USMCA, which Trump himself signed into law in 2020. The agreement is due for renegotiation in 2026, under its “sunset” provision. Trump spoke with Canadian Prime Minister Justin Trudeau about trade and border security.
A Canadian source described the discussion as productive. In Mexico, lower house leader Ricardo Monreal warned against escalating trade retaliation, advocating for institutional cooperation to address trafficking issues instead, per Reuters, as quoted on Yahoo Finance.
If the USMCA deal remains under pressure, these ETFs will be impacted.
If the USMCA deal falls apart, one of the main losers is likely to be corn. Since Mexico is one of the largest purchasers of American corn, the value of this soft commodity could decline, potentially impacting the price of the Teucrium Corn ETF CORN.
Trump’s win in the U.S. presidential election has been a pain for several foreign country investing. Currently, Mexico is facing the greatest impact. The country ETF, iShares MSCI Mexico Capped ETF EWW, dropped 2.8% after hours on Nov. 25.
Canada is another country expected to suffer from this turmoil. iShares MSCI Canada ETF EWC lost 1.8% after hours on Nov. 25, 2024. Invesco CurrencyShares Canadian Dollar FXC was also off 0.3% after hours on the same day.