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The economic consequences of raising tariffs on goods from Mexico could be severe, especially in Texas, and puts future trade at risk, say local business leaders.
The White House strategy meant to force Mexico to stem the flow of Central American migrants into the United States threatens the economy of both countries, as well as the progress negotiators have made in renewing the landmark trilateral trade deal now known as the U.S. Mexico Canada Trade Agreement (USMCA).
Watching those issues closely, IBC Bank executives Dennis Nixon and Gerry Schwebel spoke Wednesday of their concern about the tariffs, conditions at the U.S.-Mexico border, and the impact of trade with Mexico at a meeting of the Real Estate Council of San Antonio.
The discussion was moderated by Eddie Aldrete, IBC Bank senior vice president and chairman of the Texas-Mexico Trade Coalition, which released a statement May 31 denouncing the tariffs: “Immigration and trade are entirely separate issues and need to be treated as such by our administration. The U.S. does not need to be distancing themselves from Mexico but working with them in a united effort at the southern borders.”
But, in Washington, D.C., also on Wednesday, a meeting between Mexican officials and the Trump administration on those issues ended unsuccessfully. Tariffs are set to begin Monday if the Trump administration is not satisfied with Mexico’s response to the immigration surge, a move that many say will set off a trade war with devastating economic consequences for both countries.
Nixon and Schwebel argued that tariffs are not the answer to managing an immigration problem that’s now complicating trade talks.
“We would hope that before you slap tariffs on, you would send a delegation down and try to work out [something] to prevent some of these asylum seekers from crossing the border and put some resources into the border on our side,” Nixon said. “I have no sense that’s even taken place.”
Snapshots from 25 years ago, when three world leaders gathered in San Antonio to sign what was considered a model trade agreement, show smiling faces and warm handshakes. In the years since, many agree the North American Free Trade Agreement (NAFTA) has delivered on its promise of prosperity.
Every day, nearly $1.7 billion in products cross the U.S.-Mexico border. Mexico tops the list of Texas’ largest import and export partners, and the border region has been transformed. In Laredo alone, unemployment dropped from 11 percent in 1992 to 3 percent this year.
The future picture is not looking as rosy as lawmakers prepare to renew the agreement.
Congress has yet to approve the USMCA, and business leaders such as Nixon, IBC Bank chairman and CEO, and Schwebel, bank executive vice president, are speaking out against the threat of tariffs on Mexican imports. They say it is a “very, very scary” situation with the potential to not only derail the trade agreement and damage relationships developed through NAFTA, but also result in price increases on consumer goods and billions of dollars in losses to the economy.
“There’s a tremendous positive relationship between the Mexican private sector and the U.S. private sector and there always has been,” Nixon said. “But … we’re not helping that process by creating a nationalistic view and creating a populous in Mexico that becomes anti-American. It’s a slap in the face of a neighbor and it’s going to create repercussions.”
Schwebel said about 80 percent of Mexican imports are delivered by truck into the U.S. With the influx of asylum seekers at the border, resources have been strained and shifted away from border crossings.
That has brought the daily flow of traffic carrying goods to and from Mexico to a crawl, and loaded trucks are waiting up to 8 and 10 hours to cross. He said those tie-ups and general uncertainty about trade with Mexico is hurting business and delaying investment.
Soon, the higher price of doing business will be passed on to consumers who could end up paying more for everything from avocados and tomatoes to cars and trucks. Toyota Motor Corp. has warned that tariffs on Mexican imports could increase auto parts costs by more than $1 billion and hurt sales of the Tacoma, its top-selling truck manufactured in Mexico and San Antonio.
The immigration problem is what’s confusing the issue, Nixon said, and that issue needs to be solved by Congress once and for all.
NAFTA has woven the economies of three countries together, and it can’t be taken apart, he said. “The way we live on the border, living in two countries, with two governments, it’s a very tough challenge when somebody pushes this thing off course for a period of time.”