New Tariffs on Mexican Imports?

by | Jun 13, 2019

In the latest trade news, U.S. President Donald Trump is threatening tariffs on imports from Mexico unless the Mexican government does more to stem the flow of immigration across the U.S. southern border. In a press conference in London, the President announced that tariffs could go into effect as soon as the second week of June 2019 unless Mexico takes satisfactory measures to curb illegal immigration, mostly from other Central American countries. Initially, additional duties would phase in at five percent, but would escalate unless Mexico meets the Administration’s expectations.

Although various members of Congress, including the Senate Majority Leader, have discouraged these tariffs, it is not clear that Congress could override a Presidential veto of legislation blocking the new tariffs. The Administration has been encouraged to make clear exactly what additional measures are expected from Mexico.

Last year, Mexico counted for about ten percent of South Carolina’s total imports, with about $3.8 billion in import traffic. Mexico was the third largest importer to South Carolina after China and Germany. Nationwide, leading Mexican imports to the U.S. include automotive parts, beer, and agricultural products.

Although the President often suggests that foreign countries pay U.S. tariffs, they often increase the cost of established supply chains into the United States. While U.S. importers can demand that Mexican suppliers lower their prices, long-term supply contracts can often stand in the way of doing so. Similarly, while some U.S. importers may be able to pass along tariff costs to their own customers, existing contract arrangements put some importers in the position of absorbing tariff increases until the next opportunity to renegotiate prices.