Mexico Import Tariffs
April 4, 2019, the White House announced a “one-year” warning for Mexico to fix the flow of illegal immigrants into the United States, or there will be new penal tariffs introduced as a result. However, this past week President Trump announced a series of escalating Mexico import tariffs set to go into effect on June 10. These tariffs are pending U.S. and Mexican officials do not take immediate steps to stop the illegal immigration flow. The tariffs are set to start at 5%, and will increase to 10% on July 1, 15% on August 1, 20% on September 1 and eventually 25% on October 1.
The tariffs are set to stay in place until “Mexico substantially stops the illegal inflow…” of immigrants coming through their country. The level of sufficiency of Mexico’s actions is “at the sole discretion” of the White House.
However, on Friday, June 7, according to a tweet from President Trump, the United States and Mexico reached a deal to avoid the 5% tariffs on all imported goods. The tweet stated that “Mexico, in turn, has agreed to take strong measures to stem the tide of Migration through Mexico, and to our Southern Border…”, thus indefinitely suspending the tariffs that would have went into effect today.
Industry leaders warn that these tariffs would have a devastating effect on the supply chain with Mexico. Roughly 32,000 United States truck drivers engage in cross-border shipments to Mexico every day. This avenue of trade between the United States and Mexico sees over $1.1 billion worth of cargo every day.
Price Inflation for the End Consumer
The effects of the new tariffs on Mexico imported goods affect end consumer prices specifically for apparel suppliers, and especially denim. Mexico is currently the United States’ 8th largest apparel supplier, and is the largest men’s jeans denim source for the United States.
Furthermore, Chipotle recently reported that they expect their costs to rise at the tune of $15 million for 2019. The majority of the vegetables imported to the United States come from Mexico. Additionally, nearly 50% of fruits imported to the United States also come from Mexico. Tomatoes are set to be tariffed at 17.5% by mid-June. The price of avocados are also on the rise due to a rough season. Prices for the end consumer will continue to climb if tariffs are applied, specifically to these goods.
Additionally, with the southwest capacity already being tight from produce, the added tariffs would send supply chain costs skyrocketing. Capacity is especially tight at the major ports of entry along the United States/Mexico border, specifically El Paso. For exact border-crossing wait times, follow this link.
BM2 Freight Services, Inc.
Phone: (859) 308-5100