Canada and Mexico Dodge New 10% Trade Tariff From Trump
The White House confirmed on February 20, 2026 that Mexico and Canada will be largely exempt from a newly announced 10% global import tariff, offering temporary relief to North America’s tightly integrated trade bloc.
- Mexico and Canada are mostly exempt from the new 10% tariff.
- The Supreme Court struck down Trump’s previous emergency-based tariffs.
- A temporary 10% duty was reintroduced under a different trade law.
- The measure expires in 150 days unless Congress extends it.
The decision came just hours after the U.S. Supreme Court struck down President Donald Trump’s earlier sweeping tariff regime, forcing the administration to pivot to a narrower legal pathway.
Supreme Court Blocks Emergency Tariff Authority
In a 6-3 ruling, the Supreme Court determined that the administration exceeded its authority by using the International Emergency Economic Powers Act (IEEPA) to impose broad global tariffs. The justices concluded that the law was not intended to justify across-the-board trade duties.
The ruling effectively invalidated the previous, higher tariff structure and opened the door to potential legal and financial consequences.
New 10% Tariff Under Different Law
Within hours of the decision, President Trump signed a new executive order invoking Section 122 of the Trade Act of 1974. The order imposes a temporary 10% tariff on imports from all countries.
However, goods that comply with the U.S.-Mexico-Canada Agreement (USMCA), known in Canada as CUSMA, are exempt from the new levy. Roughly 90% of Canadian exports qualify under the agreement, shielding a large portion of North American trade.
Sector-specific tariffs remain in place. Duties on steel, aluminum, and automobiles – imposed under Section 232 and Section 301 authorities – are unaffected by the court ruling and continue to apply.
Effective Tariff Rates Drop Sharply
The exemption significantly reduces the overall tariff burden on both Mexico and Canada.
Mexico’s effective tariff rate declines to about 4.4%, down from prior levels that reached 25% on non-qualifying goods. Canada’s effective rate falls to roughly 3.7%, compared to earlier rates as high as 35% on goods outside trade agreement protections.
For businesses operating across North American supply chains, the move provides short-term certainty but does not eliminate longer-term risks.
What Happens Next
The new Section 122 tariffs are temporary and expire after 150 days unless Congress approves an extension. That creates a tight political timeline heading into the second half of 2026.
A mandatory review of the USMCA is also scheduled later this year, and the Trump administration is widely expected to seek additional concessions from trade partners during that process.
Meanwhile, the Supreme Court decision could trigger lawsuits seeking up to $170 billion in refunds for tariffs collected under the invalidated IEEPA framework. If successful, those claims could carry significant fiscal implications.
For now, North America has avoided the full impact of the new global tariff. But with legal challenges, political negotiations, and trade reviews ahead, the tariff battle is far from over.
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