EL PASO, Texas (Border Report) – President Trump on Wednesday paused tariffs on automotive imports from Mexico and Canada.
The monthlong respite was particularly welcome in Juarez, where nearly half of its maquiladoras are engaged in automotive-related production, industry leaders south of the border said.
“We worried how much this would affect our industry, which is a big part of our region. Eighty-five percent of our exports are from manufacturing, so that 85 percent will not be affected as much,” said Manuel Sotelo, president of the Juarez Transportation Association.
On top of that, some manufacturers are under the impression the tariffs only apply to value-added content on parts that originate in the United States. “Manufacturers (will be) paying the 25% on that 2, 3, 4 percent of the value added,” Sotelo said.
According to Clark Hill international law firm, exceptions to the tariffs Trump used under the International Emergency Economic Powers Act include certain goods that receive duty-free treatment under the Harmonized Tariff Schedule. Products that were repaired abroad or assembled abroad using U.S. components may face tariffs on only a portion of value.
Texas-based Jackson Walker law firm on Wednesday urged maquiladoras to conduct “careful studies” on whether the importer will pay the 25% duty on the value of the assembled product minus U.S. content or merely on the value of Mexican labor that assembled that product.
Sotelo said he sympathizes with the non-maquiladora Mexican exporters who remain in the crosshairs of the Trump tariffs.
“The impact on the Mexican manufacturer will be strong and it will take them some time to find other markets or modify their processes,” the trucking association executive said. “I know if something affects my costs, I have to (recoup) that from the client, and in the end that affects the final consumer.”
He added people in Mexico still don’t know what Trump wants out of the country.
“It’s clear the Mexican government has not fulfilled Trump’s expectations. (In February), we were told migration would be under control, that we sent 10,000 (Mexican) National Guard to the border. We also negotiated drones and reconnaissance planes flying over Mexico, and we didn’t know about that,” Sotelo said. “So, we don’t know what the Mexican government failed to comply with; all we know it has to do with fentanyl.”
Mexico will survive despite tough times
In the U.S., a binational trade expert says Mexico is no doubt going through a rough period that includes Trump’s tariffs and other unrelated economic and political challenges.
But he said the Mexican economy would weather the storm.
“There are a lot of businesses not making any moves until they see what the deal is,” said Al Zapanta, president and CEO of the U.S.-Mexico Chamber of Commerce. “There is a change in the dynamics of the judicial system in Mexico, where you are going to have political judges making decisions on contracts. That doesn’t give a lot of confidence to people who know what they’re doing from a business or legal standpoint.”
He said remittances, another pillar of the Mexican economy, are starting to trend down coincidentally at a time Mexico is feeling the pinch of the tariffs meant to bring down illegal fentanyl exports to the United States and do more against the drug cartels.
“The Mexican government is going to have tough year. It doesn’t mean they can’t weather it. What is does mean is they need to reach out to make sure American businesses are comfortable coming in or continuing to come in or investing in Mexico,” Zapanta said. “Even though there is some tough rhetoric out there, some tough times, we are neighbors and we need to figure out how to continue to do business.
“You don’t react, you just try to maintain the relationship of trust and support and continue to do what you do.”
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