From the SEMA Washington, D.C., office
The tariffs issue remains a fluid, rapidly evolving issue. Below is the latest straight from D.C., but first:
SEMA is seeking updated feedback on how tariffs affect businesses in the industry. If you are an executive, owner, or authorized business representative, please take part in our survey to provide your insights, which will significantly aid our ability to advocate on your behalf.
U.S. Tariff Policy Escalates as Trump Targets Canada, EU, and Mexico
After a week marked by rapid escalations in United States trade policy, President Donald Trump threatened sweeping new tariffs on imports from Canada, the European Union (EU) and Mexico, sparking newfound concern among manufacturers, trade partners and United States allies. The threats, if implemented, would represent a significant shift in the current tariff landscape. At its core, the threatened tariffs have serious implications for the future of the United States-Mexico-Canada Agreement (USMCA) and broader global supply chains.
Canada Tariff Threat
The most immediate development came late on July 10, when Trump announced in a letter to Canadian Prime Minister Mark Carney that the U.S. would impose a 35% tariff on Canadian goods, starting August 1. Trump's letter cites fentanyl trafficking as the reason for the policy shift, and makes clear that the tariffs could be "modified, upward or downward, depending on our relationship with your Country." This suggests that Trump intends to maintain his preferred tactic of using tariff threats as diplomatic leverage.
- According to the Trump administration, the new 35% rate will apply only to goods that do not meet USMCA rules of origin for duty-free trade. USMCA-compliant products--including many vehicles and parts--are currently exempt from both the 25% and 35% tariffs. As of now, Canadian and Mexican parts that do not meet USMCA standards face a 25% tariff, but that rate would jump to 35% under the proposed policy.
According to media reports, Trump administration officials are still finalizing the list of affected goods and that "no final decisions have been made," though USMCA-exemptions are expected to remain in place.
- Notably, auto parts that fall outside of the USMCA's requirements but are not on the United States' list of targeted auto components would also be subject to the higher tariff.
This latest move follows a series of escalating trade duties with Canada. Canada had previously threatened to impose retaliatory tariffs on July 21 if the U.S. did not reverse its decision to raise steel and aluminum tariffs to 50%. Canada has since walked back that threat, as it reassesses its position amid the broader fallout from the tariffs.
Impact on Europe and Mexico
In two separate July 13 letters, Trump threatened 30% tariffs on the European Union and Mexico, both with an August 1 start date. These new rates would increase existing tariffs on both trading partners--up from 20% on EU goods and 25% on Mexican products.
- Together, the EU and Mexico account for roughly one-third of all U.S. imports, with the U.S. importing $605 billion from the 27 EU member nations and $505 billion from Mexico in 2024. The new tariffs represent a dramatic uptick in pressure on two of America's most significant trade relationships.
As with Canada, the rationale behind these tariffs remains partly tied to fentanyl trafficking concerns, particularly with respect to Mexico.
Other Nations
Trump, in a July 10 interview with NBC News, said that countries not receiving a direct tariff letter would also face increased tariffs--potentially up to 20%, double the current 10% rate. This marks a broader and more aggressive application of tariffs as a default tool of U.S. trade policy.
- Though prior administrations had typically wielded tariffs as a narrow remedy for trade imbalances or unfair practices, the Trump strategy appears to frame them as baseline expectations for all foreign exporters unless special exemptions are negotiated.
Implications and Outlook
The specialty aftermarket is watching closely, as many manufacturers rely on integrated North American production networks that span across Canada, Mexico, and the United States.
- Industry analysts caution that fluctuations in tariffs could destabilize supply chains and increase consumer prices.
While USMCA-compliant products are currently shielded from the steepest penalties, the burden of compliance--particularly in complex industries like auto manufacturing --remains high. Any changes in what qualifies as "compliant" could expose additional imports to higher duties and affect pricing and availability.
Furthermore, the lack of clarity about final implementation and the use of tariffs as a negotiating tool tied to non-trade issues (such as drug enforcement) introduce additional uncertainty. Trade partners are now forced to choose between making concessions on non-economic matters or facing financial penalties on billions in exports.
The August 1 deadline now looms large. Whether these threats materialize into permanent policy or remain leverage in future negotiations will determine the longer-term impact on both U.S. industry and global trade dynamics.
SEMA Collecting Data
SEMA continues to gather feedback from aftermarket industry businesses on how tariffs impact your ability to ship goods and products and import the materials and components you need. Executives, owners and business representatives: Take part in our survey to provide your insights, which will greatly aid our ability to advocate on your behalf.
Questions? Please reach out to Juan Mejia, SEMA's senior manager for federal government affairs at jmejia@sema.org.
This story was originally published on Tuesday, July 15.
Image courtesy of Shutterstock
