Mexico City, Jan 31 (Reuters) - If the U.S. President follows through on his pledge to impose 25% tariffs on imports from Mexico, it could mark a new volatile chapter in the long-standing trade relationship, impacting consumers.
Mexico is the largest trading partner of the United States, accounting for over 15% of total trade. In 2023, the U.S. imported more than $475 billion worth of Mexican products, a figure that has surged about 70% over the past decade, according to census data. U.S. exports to Mexico also reached over $322 billion.
Amidst this significant mutual dependence, the emergence of tariff threats, even against Mexico as a signatory of the United States-Mexico-Canada Agreement (USMCA), stemmed from a campaign trail commitment by Trump to safeguard American industry and assert policy demands. Trump's pledges varied from a universal tariff on foreign imports to tariffs specifically on vehicles from Mexico.
The President aims to establish a government entity to "collect tariffs, duties, and all revenue" from foreign sources, contending that Americans have endured excessive taxation by the Internal Revenue Service (IRS) and asserting that it is time for trade beneficiaries to pay "their fair share."
In the case of Mexico, Trump has utilized tariff threats to urge President Claudia Sheinbaum's administration to intensify efforts against migration and fentanyl trafficking.
Recently, Trump reiterated his stance against Mexico and Canada.
Sheinbaum and her officials have hinted at Mexico's intent to retaliate with tariffs on U.S. exports if Trump proceeds with imposing tariffs, cautioning that such reciprocal actions would result in significant economic losses for both nations.
Sheinbaum has expressed certainty that Trump will implement the tariffs by Feb 1.
While defending Mexico's cooperation in halting migrants at the U.S. border and tackling the fentanyl epidemic, Sheinbaum mentioned that criminal groups in Mexico are illicitly acquiring firearms from the U.S.
Among the sectors mainly affected by the potential tariffs, the automotive industry stands out, representing $129 billion in Mexican imports in 2023. The supply chains of the USMCA's three members are deeply interconnected, with Mexico and Canada contributing to over 50% of all auto parts exported to the U.S.
Expected new tariffs are likely to impact major U.S. automakers, such as General Motors, which have manufacturing facilities in Mexico, ultimately leading to higher prices for SUVs and pickup trucks for American consumers.
Other significant categories set to be influenced include electric machinery, various parts and equipment like motors, generators, motor fuels, crude oil, and petroleum coke.
Beverages and spirits, such as tequila, mezcal, and beer, constitute a substantial part of U.S. imports, amounting to nearly $12 billion in trade.
Additionally, the U.S. heavily relies on Mexican agricultural products like sugar, flour, meat, and fresh fruits and vegetables, including avocados, which are expected to experience a surge in demand leading up to the Super Bowl.