Wednesday, June 5, 2019
Volume 2, Issue No. 10

Mexico Is Latest Tariff Target

With the percolating U.S.-China tariff stand-off headed to hearings in Washington, D.C. later this month and possible damaging ramifications for the footwear and apparel industries, the Trump Administration initiated a new duty war late last week by vowing to impose 5 percent tariffs on all goods entering the U.S. from Mexico starting June 10 unless the Mexican government stems the flow of illegal immigrants into the U.S.

President Trump took his threat with the country’s neighbor to the South a step further, vowing to increase the tariffs on all Mexico-produced goods by 5 percent monthly starting July 1, until it reaches 25 percent, unless the illegal immigration issue is addressed to his satisfaction. The president’s latest tariff action could hamper passage of the USMCA (U.S.-Mexico-Canada Agreement) trade deal that was signed Nov. 30, 2018 and was expected to replace the NAFTA free trade agreement.

Trade analysts immediately panned the administration’s Mexico duty proposal as having the potential to obstruct tightly woven supply chains across North America, affecting everything from cars, flat screen TVs and washing machines to avocados and footwear.

The National Retail Federation, confirming the higher prices for U.S. consumers if tariffs on Mexican imports move forward, said, “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 more USMCA forward.”

With early estimates pegging the financial impact range of the Mexico proposal to range between $18.6 billion to almost $93 billion at a 25 percent duty rate, trade groups and the U.S. Chamber of Commerce also weighed in negatively on the plan.

“Imposing tariffs on goods from Mexico is exactly the wrong move,” said Neil Bradley, chief policy officer for the USCC. “These tariffs will be paid by American families and businesses without doing a thing to solve the real problems at the border. Instead, Congress and the president need to work together to address the serious problems at the border.”

Meanwhile, the Footwear Distributors and Retailers of America, already working with U.S. footwear companies and retailers on a possible tariff on shoes imported from China, said the separate Mexico pronouncement threatens to further harm U.S. footwear consumers and companies. U.S. footwear imports from Mexico rose 20 percent to $500.2 million in 2018, the second-biggest year on record, the trade group noted.

“Mexico served as a strategic sourcing location for certain brands wanting to make quality leather shoes at affordable prices close to market,” said FDRA President and CEO Matt Priest. “Adding higher costs on these shoes … not only raises rates, but it will start to limit products we see on store shelves.”

In its analysis, the UCC estimated the Mexico initial tariff hit would result in a potential tax increase on U.S. businesses and consumers of $17 billion, rising beyond $86 billion if the threatened tariff cap of 25 percent is reached in October.