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U.S. companies
have begun to respond to President Donald Trump’s proposed tariffs on Mexican imports with mixed comments on the effects these tariffs would have on the U.S. economy and its customers.
The tariffs initially set at 5%, will rise every month until they reach 25% on October 1, unless Mexico fulfills Trump's demand to stop migration from Central America .
Yesterday, Economy Minister Graciela Márquez said that Trump's tariff s on Mexican exports would impact all 50 U.S. states and harm value chains, consumers, and trade-related jobs in both countries.
In a joint statement, Márquez and Agriculture Minister Victor Villalobos said the proposed tariffs would cause total economic damage to the agriculture sector of USD $117 million per month in both countries .
Nevertheless, Trump claimed he will likely impose the tariffs , despite the negative effects they would have on the U.S. economy .
Today in London, Trump insisted that Mexico should stop the “ invasion ” of the United States : “Mexico should step up and stop this onslaught, this invasion into our country.”
Furthermore, Trump’s tariff threat last week was aimed at pressuring Mexico , but it spooked global markets and put a joint trade pact between the two countries and Canada at risk.
In an unusual move, Republican lawmakers have begun discussing whether they may have to vote to block the tariffs , according to the Washington Post, as the tariffs have been criticized by the U.S. Chamber of Commerce and industry groups.
Deputy Foreign Minister Jesus Seade
met with U.S. Trade Representative Robert Lighthizer and U.S. Chamber of Commerce head Tom Donohue over the tariff and immigration dispute, a member of Seade’s staff said today.
Foreign Minister Marcelo Ebrard
is set to meet with U.S. Secretary of State Mike Pompeo in Washington on Wednesday.
But how would Trump's tariffs affect U.S. commerce?
The tariffs are expected to result in an increase in prices in everything from cars to avocados for U.S. consumers .
For example, one of the U.S. companies that would be affected the most by the proposed tariffs would be Chipotle Mexican Grill Inc , as the U.S. chain estimated a USD $15 million hit from Trump’s proposed tariffs on Mexican imports, and said it could cover that by raising burrito prices by around USD $5 cents. Chipotle did not disclose how much it imports from Mexico, but according to its last annual filing, a “substantial volume” of its produce is grown in Mexico .
But these company wouldn't be the only victim of Trump's tariff . On Friday, the head of Mexico’s main farm lobby suggested Mexico should target agricultural goods produced in states that have voted for Donald Trump’s Republican Party if the trade conflict between the two neighbors worsens.
Bosco de la Vega,
head of Mexico’s national farm council CNA , said that such retaliatory measures should only be applied as a last resort and that he supports the Mexican government’s efforts to seek a negotiated settlement to the dispute.
De la Vega criticized what he described as Trump’s unjustified “mistreatment” of Mexico by threatening the across-the-board tariffs on the country’s exports and emphasized that any potential retaliation should seek to cause the U.S. leader maximum political pain.
“In the unlikely event that (the U.S. tariffs are enacted), we will be supporting the government in surgically implementing tariffs aimed at farm products in Republican states,” he said.
Mexico has employed this strategy before as a means of pressuring Trump’s base of supporters in the rural U.S. by seeking to convince them his policies are counterproductive.
Nevertheless, the president of Mexico’s national farm council, which represents the country’s largest private sector agriculture and livestock companies , said some of the potential targets include yellow corn, pork legs, apples, potatoes, and whiskey .
Moreover, according to Raul Urteaga, Mexico’s top agricultural trade official in the previous administration, said Trump’s tariffs are illegal under international trade rules: “WTO rules and NAFTA don’t contemplate the imposition of tariffs because of migration issues (…) Mexico will not have any other option but to retaliate in kind” if the U.S. tariffs are enacted, said Urteaga.
Also, Trump’s threats to tax Mexican imports could damage a long-standing cross-border energy trade , hitting U.S. consumers and refiners that use Mexican oil by increasing prices and raising concerns about potential retaliation by the world’s biggest buyer of U.S. energy products .
Mexico sends 600,000 to 700,000 barrels of oil to the United States every day, mostly to refiners that process that crude into gasoline, diesel and other products.
Mexico buys more than 1 million barrels per day (bpd) of U.S . crude and fuel, more than any other country, and analysts are concerned that retaliatory tariffs from Mexico could disrupt that trade.
A spokesman for Chevron Corp said the imposition of tariffs may spur “retaliatory actions that impair the development of new markets,” adding that the company supports free and fair trade . Chevron has opened 100 retail gasoline stores in Mexico since 2017.
Trade group American Fuel and Petrochemical Manufacturers
warned tariffs could raise domestic fuel prices and jeopardize the proposed trade deal. The American Petroleum Institute said the tax could hurt the U.S. economy.
Tariffs could add USD $2 million to the cost of daily Mexican crude purchases by U.S. refiners , analysts at PVM Oil Associates said.
A sharp decline in supplies from Mexico could raise the cost of fuels overall if U.S. refiners are forced to buy heavier crude grades from further away, adding to shipping costs.
The auto industry would also be greatly affected by Trump's tariffs as automakers have long built vehicles in Mexico, taking advantage of the country’s cheap labor, trade deals and proximity to the United States, the world’s largest auto market after China.
Some of the auto companies affected would be General Motors Co, Nissan Motor Co Ltd, Fiat Chrysler Automobiles NV, Volkswagen AG, Daimler AG, Kia Motors Corp, Ford Motor Co, Toyota Motor Corp, Audi AG, Mazda Motor Co, and Honda Motor Co.
Electronics manufacturers
that export goods to the U.S. include LG Electronics Inc as almost all of the TVs manufactured in Mexico are shipped to the United States, and about one-third of the refrigerators, a company spokesperson said.
In regards to aerospace , Safran SA manufactures parts for its joint venture with General Electric, CFM, which is the sole engine supplier for Boeing Co’s 737 , in Mexico and Bombardier Inc makes the rear fuselage of its long-range Global 7500 business jet in Querétaro.
On the other hand, Trump's threats have affected the Mexican economy in recent days and will affect exchange rates, inflation, and economy in genera l if implemented, according to the Bank of Mexico .
Moreover, experts claim this is not a good time to make investments and also expressed concern over the obstacles the Mexican economy will face in the near future.
Experts also expect the US Dollar price to reach MXN $19.83 later this year . Inflation is expected to reach 3.75% .
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