NM Businesses Brace for Mexico Tariffs

Companies across New Mexico and especially those on the border are bracing for a potentially “catastrophic” economic blow after President Donald Trump vowed to impose tariffs on all products from Mexico.
The startling announcement came in a tweet from the president Thursday: “On June 10th, the United States will impose a 5% Tariff on all goods coming into our Country from Mexico, until such time as illegal migrants coming through Mexico, and into our Country, STOP.”
And the tariffs will go up each month until they reach 25% in October, according to the White House.
“It’s like threatening Mexico, ‘You better do this,’ and you take a pistol and you point it at your own foot,” said Jerry Pacheco, CEO of the Santa Teresa-based Border Industrial Association and a Journal columnist.
Border companies that depend on trade with Mexico will bear the brunt of any tariffs.
“We’ve become the cannon fodder on the front line from this action,” Pacheco said.
Santa Teresa is New Mexico’s busiest border crossing and accounts for about $2 billion in trade alone annually.
Santa Teresa importance
“Almost half of state’s total exports to the world are generated in Santa Teresa because we’re so tied to the Mexican economy,” Pacheco said.
Gov. Michelle Lujan Grisham in a statement said the “tariffs have the potential to be economically catastrophic.”
“Our state sends almost $1.5 billion in exports to Mexico each year; a trade war would devastate businesses all across New Mexico, in rural and urban communities alike,” she said.
The planned tariffs sparked opposition even from usual Trump allies such as Sen. Chuck Grassley, R-Iowa, who called the action “a misuse of presidential tariff authority,” and the news sent stock markets tumbling, with the Dow Jones Industrial Average closing down roughly 355 points, or 1.4%.
Businesses on both side of the border share production lines and integrated supply chains for automobiles, electronics and produce that come through the ports of entry. The border economies are intertwined and affect all types of businesses.
“We’re not a manufacturer, but we depend on the manufacturers,” said Lane Gaddy, CEO of W Silver Recycling.
The company processes recyclable metal and electronic waste at 11 locations, including Albuquerque and Santa Teresa.
“Of our 500 employees, the vast majority are U.S.-employed, so if manufacturing slows down in Mexico, we have reduced head count,” Gaddy said.
Adding to turmoil
Companies in New Mexico already have been coping with long lines at ports of entry after more than 750 U.S. Customs and Border Protection officers were reassigned to help the Border Patrol earlier this year.
“We feel like we’re walking through glass. It’s already a precarious time to be on the border manufacturing, and this is just yet another slap in the face to business in region,” said Gaddy.
The uncertainty created by the planned tariffs will have an economic impact across the county well beyond border states, according to Jon Barela, CEO of the Borderplex alliance. The organization promotes economic development and recruits companies for Doña Ana County, El Paso and Ciudad Juarez.
“We know that jobs in the borderplex region and in New Mexico will be threatened by this action, but there are between 5 (million) and 6 million jobs that directly rely on trade with Mexico, and those jobs and the sophisticated supply chains that have been established between the two countries will be either threatened or terminated,” Barela said.
Business owners outraged
Barela said he’s getting calls from numerous business owners in the region who are outraged and perplexed by the president’s effort to use tariffs to deal with immigration problems.
The president’s action amounts to a tax on U.S. consumers that “will not solve the migrant crisis, and in fact, Mexico, before this action, this misguided action, was already taking firm steps to secure its own southern border in a meaningful and productive manner,” Barela said.
Mexico has provided humanitarian visas to encourage migrants headed for the U.S. to stay in the country and is now taking back hundreds of migrants from other countries who have pending asylum cases in U.S. immigration court under the “remain in Mexico” policy. The country has also detained and deported thousands of Central Americans.
But Trump has grown increasingly frustrated by the steady influx of asylum-seekers. Most are Central American families and children on their own traveling up to the border.
Border Patrol agents took 1,036 people, the largest group of migrants, into custody in El Paso on Wednesday. Large groups of Central Americans have also arrived in southern New Mexico seeking asylum.
Gov. Lujan Grisham said the president has the tools and funding to effectively address border security.
“He should work with Congress and our Mexican neighbors on comprehensive immigration reform. Instead, he punishes New Mexicans and residents of other states for a situation he has created and exacerbated, one only the federal government can fix,” she said.
Top trading partner
Mexico is America’s largest trading partner, and $346 billion in imports would be subject to tariffs if the president makes good on his threat. That would translate to higher prices for American consumers on products ranging from food to computers. The tariffs are expected to hit the auto industry especially hard.
“It put a knot in my stomach. Anything that slows down new car sales it’s going to ripple through,” said Alexander Sierra, ACME Mills corporate director of customer experience.
The Santa Teresa company sources and supplies textiles and materials that go into car seats and other products. “If you sit on it, we’re a part of it,” Sierra said. “Most car and truck seats are made in Mexico.”
In addition to billions of dollars in auto parts crossing in both directions across the border, Mexico is the eighth-largest supplier of clothing and seventh-largest supplier of footwear to the U.S. market. It’s the largest supplier of men’s and boy’s jeans, accounting for 35% of imports, according to the American Apparel & Footwear Association.
By: Angela Kocherga (ABQ Journal)
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