When the United States signed a free-trade agreement with Canada and Mexico more than 30 years ago, the premise was that partnering with two other thriving economies would also benefit America. This week, President Trump abruptly scrapped that idea. He imposed a sweeping 25% tariff on the roughly $1 trillion of imports that Mexico and Canada send into the United States each year as part of that North American trade pact.
If the tariffs had been maintained, they would have significantly raised costs for Canadian and Mexican exports, undermining their economies and likely tipping them into recession.
Mr. Trump’s flirtation this week with unwinding decades of economic integration raises big questions about the future of North America and the industries that have been built around the idea of an economically integrated continent.
Economists argue that tariffs could cause major disruptions in Canada and Mexico, because they are so reliant on the US economy. Trade accounts for about a quarter of US economic activity, compared with roughly 70% for Mexico and Canada. Canada and Mexico both send about 80% of their exports to the United States, while only about a third of US exports go to Canada and Mexico collectively.
