Tariff Tactics

AIM Media Texas newspapers, The Monitor, Valley Morning Star and Brownsville Herald, partnered to produce a series of stories gauging the impact on the Rio Grande Valley if President Trump would gone through with his threat to impose a tariff on Mexican goods. Interviews for this story were conducted prior to the president’s announcement late Friday that the U.S. had reached a deal with Mexico to suspend the tariff in exchange for Mexico helping stem the flow of Central American migrants crossing the border. The results showed a region bracing for impact, and the bipartisan opposition the president’s threat quickly amassed.

BROWNSVILLE — As Mexico scrambled last week to head off the imposition of a 5 percent tariff on all its exports to the United States, alarm bells were going off in this country over projected economic damage to Texas and the United States.

However, President Donald Trump on Friday eased off on his threat from May 30 to implement 5% tariffs June 10 after Mexico and the White House reached a deal Friday that will result in Mexico taking “strong measures” to stem the arrival of Central American migrants at the U.S.-Mexico border, the Associated Press reported.

Trump’s tariff plans appear to be on hold.

Mexican officials reportedly are floating the idea of deploying thousands of national guard troops to the country’s border with Guatemala to curtail the flow of migrants, but only on the condition that Trump not impose the tariff.

Last week, as the president’s tariff threat loomed, a number of Democratic and Republican lawmakers, economists and organizations that advocate for U.S.-Mexico trade warned of dire fallout if such a tariff took effect — with some experts warning the move could have helped trigger a U.S. recession next year.

The 5% tariffs could have increased monthly to 25% under Trump’s original plan.

The Texas Border Coalition, for one, was firmly opposed to the proposed tariffs. The organization’s chairman, Laredo Mayor Pete Saenz, said on May 31 that a unilateral tariff on Mexican imports to the United States was an inappropriate response to the migrant crisis and likely would make things worse for border communities already staggering under the burden of “crushing numbers of Central Americans seeking asylum in our country.”

He said there is evidence the tariff would have been on shaky constitutional or legal ground “and probably violates international agreements including the North American Free Trade Agreement and those underlying the World Trade Organization.”

The Border Trade Alliance, which represents trade interests along the entire U.S.-Mexico border, released a statement June 5 that urged U.S. and Mexican officials to work in good faith and with urgency to come to an agreement that would avoid any tariffs.

“Despite the president’s claim that companies will return to the U.S., new tariffs will only increase costs for U.S. manufacturers, cause higher prices for U.S. consumers, and will ultimately result in job losses and weaken overall economic competitiveness,” said BTA Chairwoman Paola Avila. “They’re a recipe for self-imposed economic harm.”

A commercial truck makes its way to a U.S. Customs and Border Protection inspection station from Matamoros, Mexico, on Friday at the Veterans International Bridge in Brownsville. The area dodged a 5% tariff on goods imported into the United States from Mexico that would have taken effect on Monday, June 10. (Denise Cathey | The Brownsville Herald)

Mexico has long been Texas’ biggest trading partner, and recently pulled ahead of China and Canada as the largest U.S. trading partner.

The Lone Star State imported more than $107 billion worth of goods from Mexico in 2018, according to the U.S. Census Bureau. Among Mexico’s biggest exports to the United States are vehicles made from parts produced in the United States.

Anything that reduces those exports, therefore, impacts the U.S. workers and businesses that manufacture those parts.

The Perryman Group, an economic analysis firm headquartered in Waco, estimated that a 5 percent tariff on Mexican imports to the United States would have eliminated more than 400,000 U.S. jobs and delivered a $41.5 billion hit to the nation’s gross domestic product. Had Mexico then decided to retaliate against the United States with tariffs of its own, Texas would be hurt disproportionately because of its close trade relationship with Mexico, according to Perryman.

Laredo, meanwhile, has surpassed Los Angeles as the nation’s busiest trade hub thanks to Trump’s trade war with China.

Frank Parker Jr., president of Parker & Co., a Brownsville-based, licensed customs brokerage and logistics firm that helps companies move goods transnationally, predicted a tariff would have caused the U.S. to import less, adding that it would have a big impact on vegetable importers in the Rio Grande Valley. Vegetables and other agricultural products are also one of the main Mexican exports to the United States.

Parker said his company would also have been affected, since it finances (for eventual reimbursement) its customers’ duties, which are “mostly zero” now for Mexicans but would likely increase to millions of dollars a month if the tariff was imposed.

Importers were expected to have passed along some portion of the extra costs to U.S. consumers, who would pay more for cars, flat screen TVs, avocados, beer and hundreds of other products imported from Mexico.

Tony Garza, former U.S. ambassador to Mexico and now counsel to White & Case in Mexico City, wrote in a June 5 email that Trump’s tariff threat was a “dramatic shift in U.S. policy for addressing trade and immigration” and represented a departure from the traditional bilateral approach of addressing individual issues separately.

A tariff on Mexico is also “simply a bad idea,” Garza said, adding that Mexico would likely retaliate with a tariff of its own. The combined result would be a major hit to U.S. companies’ bottom line and U.S. consumers’ pocketbooks alike at a time the U.S. economy appears to be slowing, he said.

Increasing the tariff beyond 5 percent would have only compounded the damage, Garza said.

While noting that the U.S. Border Patrol apprehended more than 90,000 migrants in both March and April, double the number in late 2018 and the highest monthly apprehensions in a decade, Garza wrote that a tariff wasn’t the answer.

“Addressing these issues requires a partnership with Mexico and joint assistance for Central America,” he said. “It requires a response that addresses Central America’s insecurity, lack of employment opportunities, and unpredictable weather and droughts.

“U.S. policy needs to be targeted toward reducing these demand factors and addressing our own domestic issues that drive the crisis, such as slow asylum processing, insufficient immediate support for (Customs and Border Protection) at the border, and few legal pathways for workers or potential immigrants from the region — in short, an approach that addresses immigration challenges with immigration policies, not punitive tariffs.”

More in this series

Ransoming an industry: Its produce held hostage, Rio Grande Valley dodges tariff bullet

For local companies, Mexico tariffs open can of uncertainty