UPDATE: May, 31, 2019: This story was updated to include new statements and analysis.
- The U.S. will impose tariffs of 5% on all goods imported from Mexico beginning June 10, according to a statement from President Donald Trump published Thursday evening. The tariffs are meant to address "the emergency at the Southern Border," the statement said.
- Whether Mexico's actions are sufficient will be at the "sole discretion and judgment" of the Trump administration, according to the statement. If Mexico's efforts are deemed insufficient, tariffs will rise to 10% July 1, 15% Aug. 1, 20% Sept. 1 and 25% Oct. 1.
- Trump said the 25% tariff rate will remain in place until "Mexico substantially stops the illegal inflow of aliens coming through its territory." The president did not provide specific metrics or goals to outline what it would look like for Mexico to successfully stem the flow of immigrants and have the tariffs removed.
Passage of the United States, Mexico, Canada Agreement (USMCA) looked promising — until now.
Two weeks ago, the three nations agreed to end steel and aluminum tariffs, one of the main barriers to ratification in the countries' legislatures. Earlier this week, Canada took the first step toward ratification of the agreement, and Mexican President Andrés Manuel López Obrador sent the deal to his country's Senate for approval.
U.S. Vice President Mike Pence met with Canadian Prime Minister Justin Trudeau this week to discuss the USMCA, among other topics. Pence called for the U.S. Congress to ratify the trade deal this summer.
Acting White House Chief of Staff Mick Mulvaney said the issues of Mexican tariffs and the USMCA "are absolutely not linked," although it's clear U.S. lawmakers don't share that perspective.
"Following through on this threat would seriously jeopardize passage of USMCA," Sen. Chuck Grassley, R-Iowa, said in a statement. The chairman of the Senate Finance Committee has been vocal about his opposition to tariffs between the three nations, writing an op-ed for The Wall Street Journal titled "Trump’s Tariffs End or His Trade Deal Dies," in reference to the steel tariffs in place at the time.
"There is no appetite in Congress to debate USMCA with these tariffs in place," Grassley wrote in the April op-ed. That sentiment will likely be renewed as new tariffs on Mexico take effect June 10, throwing a wrench into what seemed to be smooth sailing for the tri-nation trade deal.
USTR sez U.S. goods imports from Mexico totaled $346.5 billion in 2018, up 10.3%. Back of the envelope: president trump just potentially raised taxes on Americans by $87 billion at the full 25%. This would be a bigger tax hike than all of his other tariffs combined.— Steve Liesman (@steveliesman) May 31, 2019
Mexico was the U.S.'s second largest supplier of goods last year, with imports totaling $346.5 billion, according to the Office of the U.S. Trade Representative. Vehicles and agricultural products were among the top imports in 2018.
Several automaker stocks dropped Friday morning after news of the tariffs spread, as many U.S. OEMs trade parts or have factories in Mexico. Even Japanese automakers took a hit, as many of their parts cross between the U.S. and Mexico before final assembly. The U.S. imported $34.1 billion in passenger cars, $33.8 billion in trucks, buses and special purpose vehicles and $47.9 billion in 2018, according to Census Bureau data.
Local businesses along the Mexican border have already suffered due to slowdowns in cross-border commerce, as Customs and Border Protection redirected staff to handle migrant processing and closed a bridge in El Paso, Texas, to commercial traffic on Saturdays. Arizona Chamber of Commerce and Industry CEO Glenn Hamer called the tariffs "a prescription for a self-induced economic slowdown."
It remains to be seen whether Mexico will retaliate and under what conditions the U.S. will lift the tariffs. López Obrador wrote a letter to Trump Thursday, saying he did not want a confrontation with the U.S. "I don't believe in ... 'a tooth for a tooth' nor an 'eye for an eye,'" the Mexican president wrote. Mexico's foreign minister is scheduled to travel to Washington Friday to negotiate with U.S. officials.