Just as we're settling into the 'new normal' in our trade war with China, in another surprise move, the Trump Administration announced Thursday that they will levy a 5% tariff on all goods imported from Mexicobeginning June 10th. With potentially, an additional 5% each month until they hit 25% on October 1st. These tariffs will remain in effect "until Mexico substantially stops the illegal inflow of aliens coming through its territory," the White House stated.
If you're initial reaction is "Yeah, so what?"
Bear this in mind, in 2018 our imports from Mexico were just over $346 billion. We import much more than just beer and avocados. Surprisingly, our top 4 imports, or two-thirds of this $346 billion are all tied to the automotive industry. In fact, every American auto factory depends on Mexican parts to build its cars or trucks. Avocados, dates, figs and pineapples bring up the rear at under $5 billion. In between the cars and the guacamole, are products commonly found in the electrical industry such as: wires and cable, telecommunication equipment, electrical power and distribution boards, electric motors and generators, electrical switches, electrical transformers and more. For what it's worth, we import far more beer (Corona and Modelo Especial are among the best-selling beers in the country) than we do electrical transformers.
If this drags on anything like China has...
We shouldn't be surprised to see price increases from our mainstay electrical manufacturers. There are many electrical manufacturers that have operations in Mexico; Hubbell, Leviton, Eaton, Acuity, and Southwire just to name a few. It's anybody's guess what the fallout will be with this newest tariff skirmish. What makes this particularly worrisome is that it's resolution has been tied directly to immigration - a complex, non-trade issue.
We'll keep you posted...
