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 commerce system that the three nations 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 (SE), warned that these taxes would signify an approximate price of $20.5 billion {dollars} for about 89 million American households. He additionally warned of the attainable inflationary impression on merchandise akin 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 charges will significantly have an effect on the automotive and electronics sectors. The automotive and electronics industries signify roughly 46 p.c of Mexican gross sales, with a mixed worth estimated at $200 billion.
The Automotive Business Is at Threat
The automotive business has proven important regional integration beneath the United States-Mexico-Canada Settlement (USMCA). This settlement permits international corporations that produce in Mexico or Canada and use domestically sourced supplies to export their merchandise to america at low tax charges.
The Trump administration has argued that this situation has been exploited by China to strengthen its automotive business. Mexico has develop into the third-largest exporter of autos worldwide. Between 2022 and 2023, its gross sales grew by 14.33 p.c and reached a price of 188.9 million {dollars}, in response to the World Commerce Group. Most of those items are shipped to america, though the origin of many will be traced again to China, which has established itself as Mexico’s foremost auto provider with exports reaching $4.6 billion in 2023, in response to the SE.
Mexico’s Nationwide Auto Elements Business (INA) has warned that the imposition of tariffs on Mexican imports will weaken commerce, cut back competitiveness within the area, and have an effect on financial stability. In a press release, 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 nations. The affiliation foresees that assemblers in Mexico may cut back manufacturing by as much as a million items 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 Leon. Consultants say that probably the most affected corporations can 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 example, he identified that 88 p.c of the pickups offered in america come from Mexico and are assembled by corporations akin to Normal Motors, Ford, and Stellantis.
The Minister of Economic system emphasised that the tariffs would signify america capturing itself within the foot, as it could straight impression its personal automotive corporations, which rely upon Mexican manufacturing to provide their home market.
Electronics Costs on the Rise
The electronics and equipment sector may also be affected. In November 2024, Mexican exports {of electrical} and digital gear reached $8.9 billion, 88.8 p.c of which had been destined for america. The manufacturing of those gadgets is concentrated in Baja California, Chihuahua, and Nuevo León, the place hundreds of jobs and meeting crops may very well be in danger.
Trump’s tariffs may have important 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 {dollars} when buying new screens, and round 5 million households would assume an additional expense of $817 million when buying fridges.