Federal Reserve Research: Common Sectoral Transmission Patterns Beneath Divergent U.S. Export Totals from Canada and Mexico
Three researchers at the Federal Reserve found that after the implementation of U.S. tariffs in 2025, Canadian exports to the United States fell by approximately 10%, while Mexican exports rose by about 16%. However, sector-level analysis within each country revealed that sectors with higher tariff exposure experienced weaker export performance to the U.S. The difference in the magnitude of sectoral responses between the two countries is not statistically significant.
In March 2025, the United States imposed a comprehensive 25% tariff on imports from Canada and Mexico. Subsequently, the aggregate export trends of the two countries to the U.S. moved in opposite directions: over the 12 months ending in April 2026, Canadian goods exports to the United States decreased by approximately 10% compared to the full year of 2024, while Mexican exports increased by about 16%—despite Mexico facing a higher average effective tariff rate. In FEDS Notes released in November 2026, Chris Avalos, Musa Orak, and Avani Pradhan, researchers at the Board of Governors of the Federal Reserve System, posed a core question: Does this aggregate divergence imply that tariffs were effective for Canada but had little impact on Mexico?
Their finding is that beneath the divergent aggregates, there exists a common sectoral pattern in both countries. Within both Canada and Mexico, sectors with higher tariff exposure indeed experienced weaker export performance to the United States following the shock in March 2025. USMCA compliance exemptions and product-specific tariffs on metals and automobiles created significant differences in exposure across various sectors, and these inter-sectoral disparities translated into observable export divergence in both countries.
Specific estimates indicate that a 10 percentage point difference in tariff exposure between sectors corresponds to roughly a 5% reduction in exports in Canada and about a 12% reduction in Mexico. The research team notes that Mexico's larger estimated response may be related to its higher average tariffs and exposure being dispersed across more sectors. However, they simultaneously emphasize that the difference between the estimates for the two countries is not statistically significant; therefore, it cannot be determined that exposed sectors in Mexico are indeed more sensitive to tariffs than those in Canada.