By Cassandra Garrison
MEXICO CITY (Reuters) – If U.S. President Donald Trump follows through on his pledge to slap 25% tariffs on imports from Mexico it could usher in a volatile new chapter in the longstanding trade relationship with the impacts hitting consumers.
Mexico is the United States’ largest trading partner, representing over 15% of total trade. The U.S. imported more than $475 billion worth of Mexican products in 2023, a figure that has grown about 70% over the last decade, census data showed. U.S. exports to Mexico also accounted for more than $322 billion.
With this heavy mutual reliance, where did the threat of tariffs come from and how would consumers be affected?
WHEN DID TRUMP START MAKING THESE TARIFF THREATS?
New tariffs on imported goods, including against Mexico which is a partner in the United States-Mexico-Canada Agreement (USMCA), emerged as a campaign trail pledge by Trump to protect American industry and push policy demands. His promises ranged from a universal tariff on foreign-imported goods to tariffs higher than 200% on vehicles imported from Mexico.
Trump wants to create the External Revenue Service, a government body “to collect tariffs, duties, and all revenue” from foreign sources, arguing that Americans have for too long been taxed by the Internal Revenue Service (IRS) and that it was time for those who benefit from trade to start paying “their fair share.”
In the case of Mexico, Trump has used the threat of tariffs to pressure the administration of President Claudia Sheinbaum to further crack down on migration and fentanyl trafficking.
As recently as Thursday, Trump said he still planned to implement the 25% tariffs against Mexico and Canada.
HOW HAS MEXICO RESPONDED TO THE THREATS?
Sheinbaum and officials in her administration have suggested Mexico would retaliate if Trump implemented tariffs with a set of their own on U.S. exports, and warned that such tit-for-tat measures would cause enormous economic losses for both countries.
Sheinbaum has said she doubts Trump will follow through on his pledge to impose the tariffs on Feb 1.
Sheinbaum has defended Mexico’s willingness to stop migrants arriving at the U.S. border and help to fight the fentanyl epidemic in the U.S., but has also said that criminal groups in Mexico are receiving guns illegally from the U.S.
WHAT WILL HAPPEN TO THE GOODS THE U.S. IMPORTS FROM MEXICO?
The largest sector by far to be affected by new tariffs would be autos and auto parts, which accounted for $129 billion worth of imports from Mexico in 2023. The supply chains of the three members of the USMCA are heavily intertwined. Mexico and Canada account for more than 50% of all auto parts exported to the United States.
New tariffs are expected to pressure the bottom line of major U.S. automakers that have plants in Mexico, like General Motors, ultimately raising prices of SUVs and pickup trucks for U.S. consumers.
The next biggest categories to be impacted include electric machinery and a wide range of parts and equipment, like motors and generators, and motor fuels, crude oil and petroleum coke.
Beverages and spirits like tequila, mezcal, and beer also make up a substantial portion of U.S. imports, totaling almost $12 billion in trade.
The U.S. is also heavily reliant on Mexican agricultural products and commodities like sugar, flour, meat and fresh fruit and vegetables including avocados, which will see a spike in demand ahead of the Super Bowl.
(Reporting by Cassandra Garrison; Editing by Stephen Coates)
