Mexico, Canada dodge 10% tariff bullet, but USMCA ‘review’ looms large

SelfRugger

2026-02-21 09:25:30

Mexico, Canada dodge 10% tariff bullet, but USMCA ‘review’ looms large

Investing.com

Sat, February 21, 2026 at 1:10 PM GMT+9 2 min read

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Investing.com – Mexico (EWW) and Canada (EWC) received a temporary reprieve on Friday as the White House confirmed that goods shipped under the US-Mexico-Canada Agreement (USMCA) will be largely exempt from the newly signed 10% global tariff.

The move follows a landmark U.S. Supreme Court ruling that struck down President Trump’s previous use of emergency powers to levy even higher duties. While the exemption lowers the immediate “tax wall” for America’s two largest trading partners, it also raises the stakes for the upcoming USMCA review.

A lower “effective” tax rate

In a surprising twist, the Supreme Court’s intervention has actually improved the immediate math for North American exporters.

Previous rates: Non-qualifying products were previously facing "hammer" tariffs of 25% for Mexico and 35% for Canada.

New reality: By shifting to a 10% global levy with USMCA exemptions, economists at Desjardins and Grupo Financiero Base estimate the effective tariff rate will decline slightly from current levels (~3.7% for Canada and ~4.4% for Mexico).

The exemption is seen as a vital win for the Automotive (CARZ) and Energy (XLE) sectors, ensuring that oil and critical manufacturing components continue to flow across borders without massive price shocks.

Trump loses his “lever” but his arsenal remains intact

Trade experts warn that while the President lost his favorite “lever” in the Supreme Court, his “arsenal” remains stocked. White House officials have already signaled a shift toward Section 301 probes, the same country-specific tool used during the original trade war with China, and Section 232 investigations into national security.

“The president didn’t lose his leverage, he just lost a lever,” noted trade lawyer Barry Appleton. The market’s fear is that the administration will now “weaponize” administrative tools to bypass Congress and the courts.

USMCA under the microscope

The most significant headwind for the Mexican Peso (MXN) and Canadian Dollar (CAD) remains the 2026 USMCA review. President Trump has reportedly questioned aides on the necessity of the pact, and analysts believe the recent court loss only adds “wood to the fire” for a radical overhaul.

“It is making it more painful for Mexico and Canada to trade with the US even if they comply with the agreement,” said Diego Marroquin of the Center for Strategic and International Studies.

For investors, the immediate exemption provides a sigh of relief for North American supply chains. However, the “USMCA Risk Premium” is likely to remain baked into the markets as the administration pivots from broad executive orders to targeted, country-specific trade warfare.

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