Mexican Tariffs Off the Table Following Border Deal

The United States maintained the threat of tariffs on Mexican goods until Friday night, less than three days before a 5 percent levy was poised to hit incoming products from south of the border. It seems the pressure worked, with the U.S. and Mexico signing a deal late Friday to prevent both tariffs and the northward flow of illegal migrants from Central America.

Automakers are no doubt breathing a sigh of relief.

Per usual, U.S. President Donald Trump signalled the deal via Twitter, writing, “I am pleased to inform you that The United States of America has reached a signed agreement with Mexico. The Tariffs scheduled to be implemented by the U.S. on Monday, against Mexico, are hereby indefinitely suspended.”

The deal came after reports emerged Thursday of a buildup of Mexican police and military forces along the country’s southern border, with Trump tweeting Friday night that 6,000 troops were now in place. Both sides engaged in three days of talks before reaching the agreement.

From the U.S. State Department:

Mexico will take unprecedented steps to increase enforcement to curb irregular migration, to include the deployment of its National Guard throughout Mexico, giving priority to its southern border. Mexico is also taking decisive action to dismantle human smuggling and trafficking organizations as well as their illicit financial and transportation networks. Additionally, the United States and Mexico commit to strengthen bilateral cooperation, including information sharing and coordinated actions to better protect and secure our common border.

Had Mexico told the U.S. to shove it, the escalating tariff (slated to hit 25 percent by October) would have proved disastrous to several industries, topmost being produce and automobile producers. As reported by Bloomberg, LMC Automotive data shows 15 percent of vehicles sold in the U.S. originate in lower-cost Mexican factories. The potential impact to domestic automakers would be vast, with Deutsche Bank estimating General Motors, the most involved of the three, would face a $6.3 billion hit had the tariff grown to 25 percent.

Consumers in the U.S. stood to face a steep rise in shelf and sticker prices had the tariff gone through. There’s a reason why Detroit Three automakers mainly keep their biggest money makers in American factories. (Well, many reasons.)

Early Saturday Trump again returned to Twitter to confirm, in all caps, something reported late this week — that in exchange for the dropping of tariffs, Mexico would “immediately begin buying large quantities of agricultural product” from the U.S.

Should Mexico’s efforts prove less than ideal at stemming the migrant flow, the State Department says both sides will “take further actions,” having agreed to continue discussions “on the terms of additional understandings.”