Tariffs on Mexican imports will ripple across the US economy


In the first three months of the year, Mexico has moved past Canada and China to become the United States’ largest trading partner, in terms of the value of goods moving back and forth over the border, with about $50 billion a month in imports and exports so far this year.

It’s not only about avocados and auto parts. Imports from Mexico can be found in almost every part of the US economy.

In the first three months of the year, Mexico has moved past Canada and China to become the United States’ largest trading partner, in terms of the value of goods moving back and forth over the border, with about $50 billion a month in imports and exports so far this year.

The tariffs President Donald Trump has threatened against Mexico would be broad, covering basically everything coming north across the border. They aren’t targeted, the way tariffs are typically levied. The impact on business, consumers and the economy could be similarly widespread.

“This is going to be felt by every sector and it’s going to be felt by consumers. Not just by businesses. Not just the auto industry. It’s going to be felt more widely and deeply than previous tariffs were felt,” said Neil Bradley, chief policy officer for the US Chamber of Commerce.

Economists, stunned by the Trump administration’s recent action against Mexico, were not prepared to make predictions about how much prices will increase for Americans, because they never considered such an action would take place. Blindsided businesses haven’t had time to determine how to replace existing supply chains with other sources, adding stress to American companies.

But some industries could be particularly hard-hit by tariffs on Mexican goods.

Autos

The United States imported $59 billion of auto parts from Mexico last year and an additional $52 billion in completed cars. Deutsche Bank estimates that if the tariffs reach 25%, it will add an average of $1,300 to the price of US cars.

Demand for American-made cars could plunge 18% if the tariffs are enacted, according to that estimate. That would be the biggest drop in car sales since the auto industry teetered on ruin ten years ago during the Great Recession.

Electronics

A fifth of computer and electronic equipment imports come from Mexico, according to Goldman Sachs. That’s about $44 billion a year in electronics. Mexican televisions, monitor displays and equipment came to more than $9 billion, or more than 35% of those imports.

The United States is also set to raise tariffs on imports from China, which is another huge source of electronics. Businesses in that sector probably won’t be able to escape increased costs.

Oil

America’s oil industry is booming, but Mexico has become an more important source of oil for the United States, because of the cutback in production by Saudi Arabia and other OPEC nations, as well as the virtual halt of oil coming in from Venezuela.

Mexico sent about $1 billion worth of oil a month north across the border so far this year. That accounted for about 10% of all US oil imports so far this year — nearly as much as Saudi Arabia exported to the United States. Gas prices have been stubbornly high this year because of the OPEC and Venezuelan cutbacks, and tariffs on such a significant source of oil could boost prices even further.

Wires, cables and conductors

The United States imports $12 billion worth of Mexican wires, cables and conductors: about 50% of America’s imports in the market. Although it’s not the type of product that many consumers think about, American manufacturers use the components to make all types of goods.

The the low-cost supply from Mexico makes the American goods they go into competitive.

Food products

Eating healthy is going to get more expensive with a 25% tariff on the $15 billion worth of vegetables imported from Mexico. About 35% of all vegetable imports to the United States come from Mexico.

Add in beverages, meats and cereal and Mexican food imports top $24 billion, or about 26% of those imported food categories to the United States, according to Goldman Sachs’ figures.

A 25% tariff on avocados would raises costs in the United States by $575 million each year, said Johan Gott, principal at consulting firm AT Kearney. Tomatoes would cost $300 million more. Cucumbers prices would rise by $116 million, and asparagus would cost Americans $107 million each year.

If the tariff remains at 25%, the cost to the beer industry will be $984 million per year, according to the Beer Institute, a trade association for the brewing industry.

Air conditioners, refrigerators, furnaces and ovens

Mexico exported $8.4 billion worth of those appliances to the United States last year, which amounted to 44% of American imports in that sector, according to Goldman Sachs.

Dishwashers, laundry machines and other household appliances added another $1.1 billion worth of imports from Mexico.

A potentially bigger threat

The tariffs won’t apply to the goods that American farmers and manufacturers send to Mexico. But Mexico could quickly levy their own tariffs on US goods.

“What we’ve seen in the last year, when one country raises tariffs, retaliation is not far behind,” said John Murphy, senior vice president, international affairs, for the US Chamber of Commerce, one of the groups opposing the tariffs.

“Tariffs are sand in the gears of the economy,” he said. “They reduce our competitiveness.”

— CNN Business’ Nathaniel Meyersohn contributed to this report

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