"Impact of 25% US tariff on Mexican & Canadian textile & apparel export", 3 February 2025

President Donald J. Trump has announced the imposition of additional tariffs on imports from Canada, Mexico, and China, invoking a national emergency under the International Emergency Economic Powers Act (IEEPA)...The tariffs include a 25 per cent duty on all imports from Canada and Mexico, a 10 per cent tariff on Canadian energy resources, and a 10 per cent tariff on imports from China. The White House has emphasised that these measures are essential to hold these nations accountable for failing to curb drug trafficking and illegal immigration...

A quick analysis of the export data highlights Mexico’s strong dependence on the US market for its textile, apparel, and footwear industries. The newly imposed 25 per cent import tariff on all Mexican products is expected to significantly impact these key export categories, which collectively account for approximately 85 per cent of Mexico’s total textile-related exports to the United States.

Breakdown of Affected Exports

1. Apparel (Knitted & Non-Knitted - HS Codes 61 & 62):

Together, these categories make up over 57 per cent of Mexico’s total textile and apparel exports to the US.

The US remains a dominant buyer due to Mexico’s proximity, cost-effective production, and USMCA trade benefits.

The tariff imposition may lead to order shifts to lower-cost Asian countries like Vietnam, Bangladesh, India and Türkiye if brands seek alternatives to offset cost increases. Caribbean Basin initiative countries and EU may also take benefit.

2. Home Textiles & Other Made-up Articles (HS Code 63):

Representing nearly 18 per cent of total textile exports, this category includes bedding, curtains, and household linens, all of which are widely sourced by US retailers.

Rising prices due to tariffs could reduce demand from American importers or push them to negotiate lower prices from Mexican suppliers, squeezing profit margins.

3. Footwear (HS Code 64):

With close to 10 per cent share of textile-related exports, Mexican footwear brands have gained traction in the US due to shorter lead times and competitive pricing.

A 25 per cent tariff could diminish Mexico’s competitiveness against Asian and European manufacturers, hurting local production and employment.

Potential Consequences

• ...American retailers and brands may pass on the tariff costs to consumers...
• ...US companies that rely on just-in-time sourcing from Mexico may face delays or increased operational costs, forcing them to reconsider procurement strategies.
• ...US importers could diversify their supply chains, increasing imports from China, Vietnam, or Bangladesh, despite ongoing trade tensions.
• The tariff could hurt employment in Mexico’s textile and footwear industries, potentially straining Mexico-U.S. diplomatic relations and challenging the trade benefits of USMCA (United States-Mexico-Canada Agreement).

Thus, the 25 per cent tariff imposition on Mexican goods poses a serious threat to the country's dominant textile and apparel exports...While businesses may explore alternative markets or cost-cutting measures, the immediate effect could be reduced export volumes, disrupted supply chains, and increased production costs...

Impact of the 25 per cent Tariff on Canadian Textile and Apparel Exports

As a USMCA member, Canada has a strong trade relationship with the US in textiles and apparel...

Potential Effects of the 25 per cent Tariff

• ...Higher costs could reduce Canadian exports as US buyers shift to alternative suppliers.
• Price competitiveness will decline, affecting Canadian manufacturers and US retailers.
• ...The tariff may slow industry growth, impacting US sectors reliant on Canadian inputs.
• ...Canadian exports may lose ground to Asian and European producers.

Thus, the 25 per cent tariff may reshape North American textile trade, prompting US buyers to seek new suppliers and Canadian firms to explore alternative markets. Adaptation through innovation and cost efficiency will be crucial for maintaining competitiveness.

Potential Beneficiaries of US Tariffs on Canadian, Mexican, and Chinese Imports

Asian Exporting Hubs

• Vietnam...
• Bangladesh...
• India...
• China...

Central and South America

Honduras, El Salvador, Guatemala, and Nicaragua...

Brazil and Colombia...

Other USMCA-Alternative Suppliers

Türkiye...

European Union (Italy, Portugal, Spain)...