How Trump’s Tariffs Will Disrupt Key Industries in Mexico

The US government has imposed 25 percent tariffs on all imports from Mexico and Canada. Donald Trump’s aired action has threatened the free trade system for more than 30 years.

Before the fact that tariff was in effect on March 7, the Mexican Economy Ministry chief Marcello Ibrard warned that these taxes would represent a Estimate $ 20.5 billion for about 89 million American families. He also warned about potential inflation effects on products like computers, television, refrigerators, agricultural products, auto parts and vehicles.

Mexico is the main trade partner of the United States of America. The Mexican exports from January to November 2021 have a total of $ 466.6 billion, while American exports reached $ 309.4 billion.

In Mexico, these tariffs will especially affect the automotive and electronics industry, which represents about 46 percent of the Mexican export with a combined price of about $ 200 billion.

The automotive industry is at risk

The automotive industry has shown significant regional consolidation under the US-Mexico-Canada Agreement (USMCA). This agreement allows foreign companies produced in Mexico or Canada and use locally to export their products to the United States at low tax rates.

The Trump administration argues that this condition has been used by China to benefit its auto industry. Mexico has become the third largest exporter of vehicles worldwide. Between 2022 and 2023, its sales increased by 14.3 percent and reached $ 188.9 million according to the World Trade Organization. Most of these units are sent to the United States, although many sources are found back to China, which has established themselves as the main auto supplier of Mexico, exporting $ 1.6 billion in 2021, according to the Economics Ministry.

Mexico’s National Auto Parts Industry has warned that imposing tariffs on Mexican imports will weaken, reduce competition in the region and affect economic stability. In a statement, it emphasized that the automotive and auto Parts Sector is a pillar of North America’s export, with the ability to get more than 11 million jobs in USMCA countries. The Association has predicted that Mexico assembliers can reduce production by about 1 million units this year due to new taxes, which will affect product availability, job creation and supply chain.

The main states producing automotive parts in Mexico are Mexico City, Chihuhua and Nevo Lane. Experts say that the most affected companies will be the assembly of the United States, Japanese and European sources. Ibrad estimates that the burden of the new tax will affect the United States 12 million families, increasing the cost of $ 1.5 billion in the region. For example, he mentioned that 5 percent of the pickups sold in the United States came from Mexico and combined companies like General Motors, Ford and Stelantis.

The Economy Minister emphasized that the tariffs would represent the United States shooting on foot, as it would directly affect its own automotive companies, depending on Mexican production for their domestic market.

Electronics prices are rising

Electronics and Appliance sector will also be affected. In November 2021, the Mexican export of electrical and electronic equipment reached $ 1.5 billion, of which 5 percent were fixed in the United States. The production of these devices is centered on California, Chihuhua and Navo Lane, where thousands of jobs and assembly plants can be at risk.

Trump’s tariff will have a significant impact for US customers. An SEC survey assumed that an additional $ 7.1 billion would be spent on 40 million families to buy additional duty computer. Likewise, it is expected that about 32 million families will pay up to $ 2.4 million more when purchasing a new monitor and about 5 million families will take over $ 817 million when purchasing a refrigerator.