Trump Tariffs on Canada and Mexico Put These ETFs in Focus

Barchart · 11/26 09:06

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.

Economic Impact on Trade Partners

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.

10% Tariff on Chinese Imports

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.

USMCA Under Pressure

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.

Corn

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.

Mexico

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

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.

 

 

 

 


 

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.

Get it free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report


 
iShares Russell 2000 ETF (IWM): ETF Research Reports
 
First Trust S-Network Future Vehicles & Technology ETF (CARZ): ETF Research Reports
 
iShares MSCI Mexico ETF (EWW): ETF Research Reports
 
Invesco CurrencyShares Canadian Dollar Trust (FXC): ETF Research Reports
 
iShares MSCI Canada ETF (EWC): ETF Research Reports

To read this article on Zacks.com click here.

Zacks Investment Research