US business groups react to tariff threat against Mexico
June 5, 2019
Business groups across the US are warning about potential damaging repercussions if proposed tariffs against Mexico go into effect.
President Trump recently announced he plans to impose a 5% tariff on all Mexican imports beginning June 10 if the country doesn’t take action to “dramatically reduce or eliminate the number of illegal aliens crossing its territory into the United States.” The tariff rate would increase steadily and could reach 25% in October. The 25% rate would remain in effect indefinitely until Mexico takes action.
But many have expressed concern that the use of tariffs isn’t the proper course of action for an immigration situation – particularly when there is a pending trade deal on the table.
Small Business & Entrepreneurship Council
In a statement, Karen Kerrigan, president and CEO of the Small Business & Entrepreneurship Council, said that in addition to raising costs for consumers, the proposed tariffs would “make our businesses less competitive.”
The Council highlighted data from the International Trade Administration that indicates American small and mid-size businesses dominate trade with Mexico. Of some 15,000 US firms that import from Mexico, 67.9% have fewer than 50 employees. And of the more than 57,000 US businesses that export to Mexico, 81.4% have fewer than 100 workers.
“The use of tariffs as leverage or a negotiating strategy does not appear to be working with our trading partners,” said Kerrigan. “What we do know for sure is that the imposition of tariffs is raising costs for small businesses, disrupting export markets for small businesses, and are a drag on economic growth.”
US Chamber of Commerce
With Mexico now the top US trading partner, the US Chamber of Commerce noted that trade with the southern neighbor supports economic growth and jobs in every state. According to the Chamber, Texas, Michigan, California, Illinois, Ohio, and Arizona would be hit hardest by tariffs on Mexican goods.
“Imposing tariffs on goods from Mexico is exactly the wrong move,” said Neil Bradley, executive vice president and chief policy officer of the Chamber, in a statement.
“These tariffs will be paid by American families and businesses without doing a thing to solve the very real problems at the border.”
The Chamber – which is the world’s largest business organization and represents the interests of more than three million US firms of all sizes, sectors, and regions – is also reportedly looking into potential legal options to challenge the proposed tariffs against Mexico.
“We have no choice but to pursue every option available to push back,” Bradley told reporters.
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National Foreign Trade Council
The proposal to put rapidly increasing tariffs on all Mexican imports is a “dangerous and destabilizing move” that will have negative repercussions on both sides of the southern border, said the National Foreign Trade Council’s president, Rufus Yerxa, in a press release.
“Raising tariffs indiscriminately on all imports from Mexico is terrible economic policy. It will cause untold harm to American manufacturers, consumers and exporters,” stated Yerxa, adding that the policy would only “intensify, rather than reduce” problems at the border.
The Council also noted that since the implementation of NAFTA more than 20 years ago, Mexico has substantially opened its economy to American exports and investment. In fact, according to the Office of the United States Trade Representative, US exports to Mexico are up 537% from 1993 (pre-NAFTA).
“International trade and investment is a two-way street,” said Yerxa. “Radical and sudden action against our neighbor and best trading partner, using a law that has only been invoked against rogue nations and sponsors of terrorism, is an action unworthy of a great nation and world leader.”
National Retail Federation
“The growing tariff bill paid by US businesses and consumers is adding up and will raise the cost of living for American families,” stated David French, NRF’s senior vice president for government relations.
“Forcing Americans to pay more for produce, electronics, auto parts and clothes isn’t the answer to the nation’s immigration challenges, and this certainly won’t help move USMCA forward.”
In 2017, US retailers imported $128 billion worth of goods from Mexico.
Just a couple of weeks earlier, the association applauded the announcement about lifting the steel and aluminum tariffs against Canada and Mexico. The NRF, the world’s largest retail trade association, said the elimination of those tariffs “will support consumer confidence and provide much-needed relief for American businesses large and small.”
The association previously said that tariffs force companies to cut costs to stay in business, and that turns into lower wages, fewer employees, deferred investments, and higher prices for consumers.
National Association of Manufacturers
Jay Timmons, president and CEO of the National Association of Manufacturers, said that like many Americans, manufacturers are also “frustrated with the broken immigration system and by the inaction that has led to a true humanitarian crisis.” But he also noted that the situation requires a “comprehensive, legislative solution” and won’t be resolved “just by blaming other countries.”
“Intertwining difficult trade, tariff and immigration issues creates a Molotov cocktail of policy, and America’s manufacturing workers should not be forced to suffer because of the failure to fix our immigration system,” said Timmons in a statement.
Timmons also noted that American manufacturers have been working hard to support passage of USMCA, and the proposed tariffs could jeopardize that deal and the two million US manufacturing jobs that depend on North American trade.
“We have taken our concerns to the highest levels of the administration and strongly urge them to consider carefully the impact of this action on working families across the country.”
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By the end of the year, the US will have imported more than 360 million cases of Mexican beer. In 2018, beer accounted for $3.6 billion out of $346.5 billion in Mexican imports to the US.
What’s more, most Mexican beer sold in the US is made from barley and hops grown by American farmers.
“The beer industry is a thriving economic engine for America. Imposing a tax – and tariffs are taxes – on the largest import country of the beer industry would harm the 2.1 million Americans who owe their livelihoods to beer,” Jim McGreevy, president and CEO of the Beer Institute, said in a statement.
“Whether it be the truck driver, farmer, distributor, local retailer or favorite tavern, every community in America will be affected by this decision.”
If the tariffs go into effect, the result would be a $12.5 million cost increase to beer industry importers in June and $374 million by the end of the year, according to the Beer Institute. If the situation carries and the tariff rate remains at 25%, the cost to the industry could reach $984 million annually.
Fresh Produce Association of the Americas
According to the US Department of Agriculture, Americans consume $12 billion worth of Mexican fruits and vegetables each year. If tariffs on Mexican goods reach 25%, consumers in the US will have to pay an extra $3 billion for avocados, tomatoes, mangoes, and other fruits and vegetables said the Fresh Produce Association of the Americas.
The non-profit association represents more than 120 US companies involved in importing, sales, and transporting fresh fruits and vegetables from Mexico.
“This is a tax on healthy diets, plain and simple,” said Lance Jungmeyer, the association’s president, in a release. “With the obesity epidemic, this is completely unacceptable and counterproductive in dealing with the migrant issue at hand.”
The new tariff threat would be in addition to a 17.5% duty imposed on Mexican tomato imports in May. Economists already indicated that move could lead to shortages and drive up tomato prices by up to 85%.
“This takes us backwards as a country and threatens USMCA passage at a critical time in moving this agreement forward,” said Jungmeyer.