With U.S.-Mexico reaching agreement, trade tensions at southern border lessen

With last Friday’s news that the United States and Mexico reached a deal that will put off the implementation of tariffs by the United States on Mexico, which it had planned to start today as a countermeasure to what President Trump called an “ongoing illegal immigration crisis” at the Southern border, it is likely cross-border trade stakeholders are breathing a collective sign of relief.

Had the U.S. tariffs come to fruition, it would have begun with the U.S. imposing a 5% tariff on all goods imported from Mexico and then raised to 10% on July 1, 15% on August 1, 2019, to 20% on September 1, 2019 and to 25% on October 1, 2019.

As previously reported, President Trump said in late May that tariffs would permanently remain at the 25% level unless and until Mexico substantially stops the illegal flow of aliens coming through its territory. And he added that if Mexico fails to act, tariffs will remain at a high level, with Mexican-based companies potentially moving back to the U.S. to make their products and goods, and companies that relocate to the U.S. not subject to tariffs or be otherwise impacted. Trump added that aside from immigration being the primary impetus for these planned tariffs that: “[o]ver the years, Mexico has made massive amounts of money in its dealing with the United States, and this includes the tremendous number of jobs leaving the country.”

Well, quickly and fortunately, it looks like things are not going to get to that point, according to a joint declaration issued by the U.S. and Mexico that stated Mexico will “take unprecedented steps to increase enforcement to curb irregular migration, to include the deployment of its National Guard throughout Mexico, giving priority to its southern border.”

Various industry and business groups issued statements following this development that pledged their support and endorsed the U.S. and Mexican governments reaching an accord. Not surprisingly, some of these organizations blasted the initial move to levy tariffs on Mexico, when it was first announced.

American Trucking Associations President and CEO Chris Spear said: “Cross-border trade with Mexico supports 47,000 U.S. jobs in the trucking industry, so America’s truckers appreciate President Trump and Mexico avoiding tariffs and addressing the immigration crisis. Free, fair and equitable trade with Mexico is of critical importance to our industry, which moved $424 billion in goods across our southern border last year. I hope this positive step will pave the way for finalizing the USMCA trade agreement.”

And U.S. Chamber of Commerce CEO Tom Donohue was also very upbeat.

“We are very pleased that the Trump administration and the Mexican government reached an agreement to address the migratory crisis at the border and remove the threat of new tariffs,” he said in a statement. This is good news for American businesses and consumers. With the threat of tariffs now off the table, it is critical that Congress turn its attention to enactment of the USMCA trade agreement. USMCA will preserve and strengthen North American trade, boosting economic growth and job creation. The Chamber intends to put all of its resources behind securing the earliest possible passage of USMCA.”

Neil Bradley, executive VP and chief policy officer for the United States Chamber of Commerce recently said before last Friday’s announcement that tariffs on Mexico would only make things worse and come at a steep costs to American families and businesses. 

“At 5% that is $17 billion in new taxes imposed on an annual basis, and at 25% it is $86 billion in new taxes,” he said. “There is no doubt that will have a negative ripple effect through our economy, which is why we are urging the President not to move forward with this plan to impose tariffs on Mexico. There are other solutions the Administration and Congress can be pursuing to address the problem at the Southern border…to address these migratory flows. But imposing tariffs will make all that we need to do all that much harder, weakening our economy at the same time.”

What happens now remains to be seen but the outlook for what may have happened had the tariffs taken effect, it would have come at a steep price for U.S. businesses and consumers, as outlined by Bradley.

At the end of the day, more businesses and consumers would be hurt and not helped by tariffs. That part was and remains pretty apparent. While the U.S. and China remain mired in a back and forth trade dispute, with tariffs going both ways still serving as a key focal point, issues remain. But with tariffs relating to Mexico off the table indefinitely, that maybe can serve as some sort of starting point for future deals that can see countries get deals done that are mutually be beneficial or short of that make thing more tenable for all parties involved.