MEXICO CITY —
Experts say much of the global economy could be upended if former President Donald Trump is re-elected and follows through on his promise to impose new tariffs on all imports into the United States. And few countries are more vulnerable than Mexico.
The economy here is almost entirely based on trade, with 83% of exports going north of the border.
Mexicans are watching the U.S. presidential election anxiously, bracing for a possible victory for Trump over Democratic candidate Vice President Kalama Harris. Last week, the value of the peso fell after opinion polls showed the former president with a slight lead in several battleground states.
Economists warn that even small increases in tariffs on Mexican goods could lead to increased unemployment and poverty, which could lead to more migration to the United States.
“Even the threat of tariffs would cause havoc,” said Juan Carlos Morenobrido, an economics professor at the National Autonomous University of Mexico. “Mexico’s long-term economic growth will slow further, which could encourage migration to the United States and Canada.”
A worker packs a Little Tikes baby swing at the MGA Entertainment factory in Ciudad Juarez, Mexico.
(Bloomberg/Getty Images)
Few global economies are as tightly interconnected as the United States and Mexico.
According to the US Department of Commerce, in 2023 the value of US exports to Mexico exceeded $367 billion, and the value of imports from Mexico exceeded $529 billion. Mexico is the United States’ largest trading partner, overtaking China in 2021.
President Trump has long complained that manufacturing jobs are leaving the United States to countries like China and Mexico, but he has said the tariffs will help bring factories back to the United States.
But economists are mostly skeptical of that claim. And there is evidence that the tariff increases enacted during his presidency cost American jobs. Many have warned that U.S. companies will end up absorbing much of the new tax, and the costs will be passed on to U.S. consumers.
Some economists predict that the 20% tariffs imposed by President Trump will ultimately cost the average American household $2,600 a year. Harris calls it the “Trump sales tax,” which could add about $4,000 a year to average households’ bills.
It’s hard to say exactly what new tariffs will mean for the U.S. and other countries, as President Trump’s proposals keep changing.
He has vowed on various occasions to impose flat tariffs of 10% or 20% on all goods imported into the United States, and has also threatened to impose tariffs of 60% or more on goods imported from China. I am doing it.
In an interview with Fox News this month, he threatened to impose exorbitant taxes on cars imported from Mexico. A large portion of U.S.-Mexico trade involves automobiles and auto parts that are transported back and forth across the border for production and final assembly.
“All I’m doing is saying I’m going to put in 200.”[%] I don’t care if it’s 500%,” Trump said. “I’ll give you a number that won’t sell a single one.”
New tariffs could spark a global trade war. Countries could retaliate by imposing their own taxes on U.S. imports, particularly on politically sensitive agricultural products. The International Monetary Fund predicts that growth will slow globally.
President Donald Trump has vowed to impose 10% or 20% tariffs on all goods imported into the United States and has threatened to impose exorbitant taxes on cars imported from Mexico.[%] I don’t care if it’s 500%. ”
(Rebecca Blackwell/Associated Press)
But countries such as Mexico, which rely heavily on exports for economic growth, will be particularly affected.
According to World Bank data, Mexico’s imports and exports amount to almost 90% of its gross domestic product. Economists have warned that even small increases in tariffs on U.S. goods pose serious risks to the economy.
“In a worst-case scenario, Mexico’s economy would slip into recession, the currency would depreciate, and inflation would rise,” said a report released this month by economic research firm Moody’s Analytics.
The mere threat of tariffs is already deterring foreign companies from investing in Mexico. Tesla, for example, announced it would suspend plans to build a new factory in Mexico until after the election, citing President Trump’s promise to impose taxes on car imports.
President Trump appears intent on targeting individual companies doing business here, recently threatening to impose 200% tariffs on John Deere tractor maker if it moves production and jobs to Mexico. There is.
“Given the threat of tariffs and the volatile nature of any tariffs that President Trump may impose, they do not provide any certainty for investment,” said independent economist Rodrigo Aguilera.
As president, Trump imposed tariffs on steel from Mexico and other countries in 2018, prompting counter-tariffs on U.S. agricultural products and straining U.S.-Mexico relations.
He also threatened to expand tariffs on all Mexican goods, which U.S. business leaders say would hurt them, and his administration has ordered more from Mexican authorities to stop migrants from reaching the U.S. border. It was withdrawn after the government promised to take action.
Some Mexican officials have said they doubt Trump will carry out his tariff threats, which are unpopular in the United States and seen as counterproductive to the U.S. economy.
Mexico’s Economy Secretary Marcelo Ebrard recently told reporters that he believes these are just election tactics. “The U.S. economy is not a manufacturing economy,” Ebrard said. “And I’m sorry, but it won’t happen again.”
But if Trump becomes president for a second term, he is likely to be surrounded by more supporters, making it more likely that he will take drastic policy steps. Some are concerned.
“President Trump will not be moderated by more moderate conservatives,” said Pamela K. Starr, a professor of international relations at the University of Southern California. “I think a second term in office will be about Trump being unleashed.”
Independent economist Rodrigo Aguilera said there was no doubt that Trump would “use tariffs to intimidate Mexico into cooperating with what he wants, whether it’s immigration or security policy.”
“Mexico will have to try to surrender,” he said.
Trump’s tariffs on Mexico would violate the United States-Mexico-Canada Agreement, the 2020 agreement that replaced the Clinton-era North American Free Trade Agreement. The new treaty, which President Trump helped negotiate, essentially requires no tariffs on trade between the North American continent. If the United States violates the agreement, Mexico would be given permission to retaliate.
Trump and former President Andrés Manuel López Obrador found themselves in unexpected tensions during their overlapping terms in office. President López Obrador has said that the relationship between the two countries is built on mutual respect, and famously called President Trump a “friend.”
Many believe that such a relationship between Trump and the country’s new president, Claudia Sheinbaum, is unlikely. One reason for this is that he doesn’t have much of a track record of working with female heads of state.
“She’s a really smart woman. President Trump seems threatened in every way,” Starr said.
Mr. Sheinbaum has largely declined to comment on President Trump’s tariff threats, other than to say that the United States, as well as Mexico, will suffer if they come true.
He recently said free trade is “just as important to the United States as it is to Mexico.”
Mr. Sheinbaum, who took office this month, inherited an economy that was already in a precarious position. The country is facing its largest budget deficit since the 1980s. And although social programs implemented by his predecessor helped lift some Mexicans out of poverty, 36% of the population remains poor and 7% live in extreme poverty.
Recent developments in Mexico’s domestic politics have surprised some investors. Business groups have criticized ongoing plans to overhaul Mexico’s judicial system, with some saying it would undermine the independence of judges.
In Mexico and many parts of Latin America, poverty and immigration are directly linked. Approximately 5 million Mexicans immigrated to the United States due to Mexico’s severe recession in the 1990s.
Times staff writer Don Lee contributed to this report.
