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 affect on merchandise reminiscent of computer systems, televisions, fridges, agricultural items, auto elements, and autos.
Mexico is a key buying and selling associate for the USA. Between January and November 2024, Mexican exports totaled $466.6 billion, whereas American exports reached $309.4 billion.
In Mexico, these tariffs will notably 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 Trade Is at Threat
The automotive business has proven important regional integration beneath the United States-Mexico-Canada Settlement (USMCA). This settlement permits international firms that produce in Mexico or Canada and use domestically sourced supplies to export their merchandise to the USA at low tax charges.
The Trump administration argues that this situation has been exploited by China to profit its auto business. Mexico has turn out to be the third-largest exporter of autos worldwide. Between 2022 and 2023, its gross sales grew by 14.3 p.c and reached a worth of $188.9 million, in line with the World Commerce Group. Most of those items are shipped to the USA, 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 Trade 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 pressured 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 may scale back manufacturing by as a lot as 1 million items this 12 months as a result of new taxes, which might have an effect on product availability, job creation, and the availability chain.
The primary states producing automotive elements in Mexico are Mexico Metropolis, Chihuahua, and Nuevo León. Specialists 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 the USA, 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 offered in the USA come from Mexico and are assembled by firms reminiscent of Basic Motors, Ford, and Stellantis.
The minister of financial system emphasised that the tariffs would signify the USA capturing itself within the foot, as it could immediately affect 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 tools reached $8.9 billion, 89 p.c of which was destined for the US. The manufacturing of those units is concentrated in Baja California, Chihuahua, and Nuevo León, the place 1000’s of jobs and meeting vegetation might be in danger.
Trump’s tariffs may have important implications for US customers. An SEC examine 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 screens, and round 5 million households would assume an additional expense of $817 million when buying fridges.
