Trump Promises Tariffs on All Mexican Goods Starting June 10th
Just when it seemed the trade climate in the North American region was easing, President Donald Trump launched a new salvo late Thursday, promising a 5 percent levy on all Mexican goods crossing the U.S. border if the country doesn’t stem the flow of illegal migrants.
The tariff would land on all Mexican goods on June 10th, ramping up to 10 percent on July 1 before topping out at 25 percent by October. For automakers and those who sell (and buy) the final product, the prospect of a new import levy is the stuff of nightmares.
Earlier this month, the White House removed steel and aluminum tariffs imposed on the U.S.’s northern and southern neighbors while moving forward with the USMCA trade deal. The U.S. hopes to ratify the deal this summer, with CNBC reporting that U.S. Trade Representative Robert Lighthizer has submitted a draft Statement of Administrative Action, paving the way for the deal’s Congressional consideration.
While yesterday’s tariff threat mirrors past threats from the Trump administration, this one comes with a deadline. It also came on the same day Mexican President Andres Manuel Lopez Obrador sent the renegotiated trade deal for Senate approval.
Mexican goods accounted for 13.6 percent of all goods entering the U.S. last year. The tally totalled $346.5 billion, with produce and vehicles/auto components ranking high on the list.
In a statement citing the International Emergency Economic Powers Act, the White House said:
If the illegal migration crisis is alleviated through effective actions taken by Mexico, to be determined in our sole discretion and judgment, the Tariffs will be removed. If the crisis persists, however, the Tariffs will be raised to 10 percent on July 1, 2019. Similarly, if Mexico still has not taken action to dramatically reduce or eliminate the number of illegal aliens crossing its territory into the United States, Tariffs will be increased to 15 percent on August 1, 2019, to 20 percent on September 1, 2019, and to 25 percent on October 1, 2019. Tariffs will permanently remain at the 25 percent level unless and until Mexico substantially stops the illegal inflow of aliens coming through its territory.
Domestic automakers like General Motors stand to be hit hard in such a scenario. As Automotive News reports, GM exported over 811,000 cars and light trucks from its Mexican factories last year.
“Margins are so thin in the U.S. market right now that there’s no way that any automaker is not going to pass on these tariffs to their customers,” Macquarie Securities analyst Janet Lewis told the publication.
“The unknown factor is the impact on suppliers, as components can move back and forth between Mexico, the United States and Canada up to 20 times before they make their way into assembled cars.”
As one would expect, the shares of automakers with a significant Mexican footprint fell in Friday pre-trading.
[Image: General Motors]
Latest Car ReviewsRead more
Latest Product ReviewsRead more
- Tassos BTW I thought this silly thing was always called the "Wienermobile".
- Tassos I have a first cousin with same first and last name as my own, 17 years my junior even tho he is the son of my father's older brother, who has a summer home in the same country I do, and has bought a local A3 5-door hatch kinds thing, quite old by now.Last year he told me the thing broke down and he had to do major major repairs, replace the whole engine and other stuff, and had to rent a car for two weeks in a touristy location, and amazingly he paid more for the rental ( Euro1,500, or $1,650-$1,700) than for all the repairs, which of course were not done at the dealer (I doubt there was a dealer there anyway)
- Tassos VW's EV program losses have already been horrific, and with (guess, Caveman!) the Berlin-Brandenburg Gigafactory growing by leaps and bounds, the future was already quite grim for VW and the VW Group.THis shutdown will not be so temporary.The German Government may have to reach in its deep pockets, no matter how much it hates to spend $, and bail it out."too big to fail"?
- Billccm I had a 1980 TC3 Horizon and that car was as reliable as the sun. Underappreciated for sure.
- Inside Looking Out I did not notice, did they mention climate change? How they are going to fight climate change, racism and gender discrimination. I mean collective Big 3.