Tariffs imposed by the US have little impact on Mexico’s economy, with some experts hailing it as a positive development for the country’s automotive sector.
The atmosphere in Mexico‘s auto industry hub, Puebla, is a mix of calm and tension. Vendors are selling their roast chicken from barbecues as usual, while a street musician tries to coax coins from passersby with his performance. However, everyone keeps anxiously checking their phones to hear the latest news from the US, where Donald Trump is about to make an announcement on tariffs.
When the updates finally popped up on people’s screens, the relief was palpable. The measures coming out of the White House appeared to be better than feared for both the city and the country. However, public opinion about Trump‘s trade policies remains divided.
The Trump administration implemented tariffs on imported goods to protect American industries and create jobs.
Tariffs are taxes on foreign-made products, ranging from 10% to 25%.
The tariffs were imposed on countries including China, Canada, Mexico, and the European Union.
The goal was to reduce trade deficits and promote domestic manufacturing.
However, critics argue that tariffs harm consumers with higher prices and disrupt global supply chains.
According to a study by the Peterson Institute for International Economics, US tariffs resulted in $68 billion in lost economic output in 2019.
Economics student Fabricio Fernandez believes there is no reason to be afraid, as ‘it’s simple — he [Trump] pays the tariffs himself.’ On the other hand, pensioner Julia fears for the future of Puebla as an automotive center. She worries that the tariffs will make cars more expensive and lead to job losses.
The imposition of tariffs by President Donald Trump had a significant impact on the global economy.
According to a study, U.S. businesses paid around $55 billion in tariffs from 2018 to 2020.
The average tariff rate for U.S.-imported goods increased from 1.4% to 3.2% during this period.
This led to higher prices for consumers and reduced economic growth.
The impact was felt across various industries, including manufacturing, agriculture, and retail.
The Mexican auto sector has been thriving since Trump‘s deal with Canada, which led to ‘strong growth among auto parts suppliers in Mexico.’ Business consultant Thomas Karig attributes this success to the increase in regional content, which was a US requirement. The share of regional content has increased by 20.5% points to a total of 75%.
Mexico has become a major hub for the automotive industry, with numerous multinational companies establishing manufacturing facilities in the country.
According to the Mexican government, the sector accounts for over 3% of Mexico's GDP and employs around 700,000 people.
The majority of production is focused on export-oriented models, with the United States being the primary market.
Key players include Ford, General Motors, and Volkswagen, which have invested heavily in modernizing their facilities to meet growing demand.
Mexico‘s Economy Minister Marcelo Ebrard is confident that the USMCA pact will benefit the country. He believes that Trump‘s ‘restructuring of global trade‘ could be an opportunity for Mexico, and the pact is ‘extremely valuable for Mexico.’ The minister added that there are no reciprocal tariffs, and a large portion of foreign trade handled through the USMCA is tariff-free.
However, not all experts share this optimism. Business consultant Kenneth Smith Ramos thinks the Trump administration might seek to renegotiate the trade terms with Mexico to further strengthen regional content. He notes that tariffs ultimately hurt the Mexican people by increasing prices for consumers and businesses.
Despite the positive outlook from some, news from the automotive industry is not all positive. Automakers Stellantis and Nissan have halted production at two of their Mexican plants following Trump‘s announcement of tariffs on imported cars. However, Sweden‘s Volvo is planning to boost its investment in Mexico, seeking to spend $700 million on its plant in Cienega de Flores.
