Mexico growers, economists troubled by Trump tariff threatsSaturday, June 01, 2019
CULIACAN, Mexico (AP) — Tomato exporter Sergio Esquer Peiro spent much of yesterday in hastily called meetings with other stunned growers, trying to evaluate the potential fallout of USPresident Donald Trump's threat to slap coercive tariffs on all imports from Mexico.
The sudden announcement stunned observers on both sides of the border and prompted President Andrés Manuel López Obrador to dispatch his top diplomat to Washington for talks, seeking to head off the proposed tariffs.
Already he and others were having to contend with a 17.56 per cent tariff on tomatoes imposed, after Washington announced in March it was ending a long-standing agreement over alleged Mexican dumping of the fruit. If the new duties do take effect, Esquer is looking at another five per cent being slapped on his products — potentially increasing to 25 per cent in subsequent months — unless Mexico does more to stop illegal migration through its territory by a June 10 deadline, per Trump's demand.
“Right now, more than anything there is a reaction of disbelief with everything that is going on,” Esquer, who's been sending tomatoes and other crops to the United States for 60 years, told The Associated Press by phone during a break in the meetings.
Economists and those whose livelihoods depend on the deeply intertwined trade relationship worth hundreds of billions of dollars a year worry that stiff duties could have dramatic, negative consequences and potentially spark a trade war.
“It also goes against the spirit there is between both countries, the agreements we have — the bilateral trade we have, which is very successful,” Esquer continued. “On the other hand, we'll have to wait for the reaction of US exporters to Mexico, because they are also going to see their exports threatened if Mexico launches some kind of mirror policy.”
From berries and automobiles to machinery and household appliances, all of Mexico's exports stand to be hit with the tariffs. Avocado growers in Michoacan, electronics factory workers in Tamaulipas and across the border from Texas, auto parts exporters all would feel the pinch.
Esquer, who does business from the tomato-growing north-western state of Sinaloa, said it's not just businessmen who stand to lose, since Mexico's estimated 700 tomato exporters are responsible for directly generating some 450,000 jobs. According to Mexico's Agriculture Department, last year some US$2 billion in tomatoes were exported to the United States, second only to tequila and ahead of avocados.
The threat also throws into question the future of the USMCA trade deal between the US, Mexico and Canada, hammered out in months of contentious negotiations as a replacement for the North American Free Trade Agreement, one of the Trump Administration's most touted achievements.
Trump's threat came the same day Mexico announced it would begin the process of ratifying the USMCA, and less than two weeks after it successfully negotiated the lifting of US steel and aluminum tariffs that had been a roadblock to final approval for the trade deal.
“It would really have a terrible impact on our producers and our exporters,” said Kenneth Smith Ramos, who led then-President Enrique Peña Nieto's delegation to USMCA talks and is now an international trade consultant at Mexico City-based AGON.
“And it would hurt US producers as well because they rely a lot on Mexican inputs for their production,” he added. “So it would reduce their competitiveness and force them to raise prices, which would ultimately, of course, hit consumers.”
That means people like Chuck Sholtis — CEO of El Paso, Texas-based Plastic Moulding Technology Inc, which employs 100 people. Most of its business involves plastic injection molding for automotive, electronics and business products for maquiladoras, factories in Mexico that are run by foreign companies. Sholtis said his company has already suffered from US steel tariffs on China that increased the costs of their tools, and it's also been hit by slowdowns at ports of entry
Sholtis said the United States has found a niche in high-tech, specialised manufacturing that's part of a global supply chain. He fears that if more tariffs like this are implemented, or if the USMCA doesn't take effect, the United States will lose its edge in manufacturing. He's also worried about possible recession in Mexico and the United States.