Tariffs Threatened on all Goods Imported from Mexico

On May 30, 2019 the White House formally sent the USMCA trade agreement — the proposed replacement to NAFTA — to Congress for review and approval, President Trump announced that he will initiate a 5% tariff on all imports from Mexico, beginning June 10, unless “Mexico substantially stops the illegal inflow of aliens coming through its territory.”

The President said the tariffs will be increased to 15% on Aug. 1, 2019 to 20% on Sept. 1, 2019, and then to a peak of 25% on Oct. 1, 2019 until Mexico complies. This would apply to all goods brought in from Mexico.

A statement from the White House read, “Tariffs will permanently remain at the 25 percent level (beginning October 1) unless and until Mexico substantially stops the illegal inflow of aliens coming through its territory.”

While stating the move is necessary in the fight against illegal immigration, the President also framed his action as a means of increasing U.S.-based manufacturing. In a tweet, President Trump said, “Tariffs will remain at the high level, and companies located in Mexico may start moving back to the United States to make their products and goods. Companies that relocate to the United States will not pay the tariffs or be affected in any way.”

These tariffs, if applied, will directly impact those who manufacture goods in whole or in part in Mexico, for import into the United States. They will also impact trade in general between the two countries, the vast majority of which is handled by tractor-trailers.

Trade between U.S. and Mexico is about $50 billion every month. Nearly 73% of this is facilitated by tractor-trailers, more than all other modes combined.

Manufacturers of trailers, trucks, automobiles and related parts and accessories seeking to import their product into the U.S. will be financially impacted should these tariffs go through and remain in effect.

The President is invoking the International Emergency Economic Powers Act in order to levy these tariffs without Congressional approval.

Such tariff action could threaten the proposed United States-Mexico-Canada Agreement (USMCA) deal. However, the White House suggested that this action is specific to Mexico’s handling of migrants coming through its country and should not scuttle the USMCA, which is a 16-year agreement.