The US authorities has imposed tariffs of 25 p.c on all imports from Mexico and Canada. The measure promoted by Donald Trump threatens the free-trade system that the three international locations have maintained for greater than 30 years.
Even earlier than the affirmation that the tariffs went into impact on March 4, Marcelo Ebrard, head of the Mexican Ministry of Economic system, warned that these taxes would signify an approximate price of $20.5 billion for about 89 million American households. He additionally warned of the attainable inflationary impression on merchandise corresponding to computer systems, televisions, fridges, agricultural items, auto elements, and autos.
Mexico is a key buying and selling associate for america. Between January and November 2024, Mexican exports totaled $466.6 billion, whereas American exports reached $309.4 billion.
In Mexico, these tariffs will significantly have an effect on the automotive and electronics industries, which signify roughly 46 p.c of Mexican exports, with a mixed worth of round $200 billion.
The Automotive Business Is at Danger
The automotive business has proven vital regional integration underneath the United States-Mexico-Canada Settlement (USMCA). This settlement permits overseas firms that produce in Mexico or Canada and use regionally sourced supplies to export their merchandise to america at low tax charges.
The Trump administration argues that this situation has been exploited by China to profit its auto business. Mexico has develop into the third-largest exporter of autos worldwide. Between 2022 and 2023, its gross sales grew by 14.3 p.c and reached a price of $188.9 million, in line with the World Commerce Group. Most of those models are shipped to america, though the origin of many will be traced again to China, which has established itself as Mexico’s essential auto provider, with exports reaching $4.6 billion in 2023, in line with the Ministry of Economic system.
Mexico’s Nationwide Auto Components Business has warned that the imposition of tariffs on Mexican imports will weaken commerce, scale back competitiveness within the area, and have an effect on financial stability. In an announcement, it careworn that the automotive and auto elements sector is a pillar of North American exports, with the capability to generate greater than 11 million jobs within the USMCA international locations. The affiliation foresees that assemblers in Mexico might scale back manufacturing by as a lot as 1 million models this yr because of the new taxes, which might have an effect on product availability, job creation, and the availability chain.
The principle states producing automotive elements in Mexico are Mexico Metropolis, Chihuahua, and Nuevo León. Consultants say that probably the most affected firms could be assemblers of US, Japanese, and European origin. Ebrard has estimated that the brand new tax burden would have an effect on 12 million households in america, with a rise in spending of as much as $10.4 billion on this space. For instance, he identified that 88 p.c of the pickups bought in america come from Mexico and are assembled by firms corresponding to Basic Motors, Ford, and Stellantis.
The minister of financial system emphasised that the tariffs would signify america taking pictures itself within the foot, as it will immediately impression its personal automotive firms, which depend upon Mexican manufacturing to provide their home market.
Electronics Costs on the Rise
The electronics and equipment sector may even be affected. In November 2024, Mexican exports {of electrical} and digital gear reached $8.9 billion, 89 p.c of which was destined for the US. The manufacturing of those gadgets is concentrated in Baja California, Chihuahua, and Nuevo León, the place hundreds of jobs and meeting vegetation may very well be in danger.
Trump’s tariffs could have vital implications for US shoppers. An SEC research estimates that the extra levy would price an additional $7.1 billion for 40 million households buying computer systems. Likewise, it’s anticipated that round 32 million households would pay as much as $2.4 million extra when buying new displays, and round 5 million households would assume an additional expense of $817 million when buying fridges.