Tariff threat alarms growers, economists in Mexico

CULIACAN, Mexico — Tomato exporter Sergio Esquer Peiro spent much of Friday in hastily called meetings with other stunned growers, trying to evaluate the potential fallout of U.S. President Donald Trump’s threat to slap coercive tariffs on all imports from Mexico.

The sudden announcement caught observers on both sides of the border by surprise and prompted President Andres Manuel Lopez Obrador to dispatch his top diplomat to Washington for talks seeking to head off the proposed tariffs.

Obrador said Mexico won’t panic over the threatened hike, but economists and those whose livelihoods depend on the trade relationship worth hundreds of billions of dollars a year worry that stiff duties could have dramatic, negative consequences and potentially spark a trade war between the neighboring countries.

Already, Esquer and other exporters were having to contend with a 17.56 percent tariff on tomatoes imposed after Washington announced in March it was ending a longstanding agreement over alleged Mexican dumping of the fruit. If the new duties do take effect, Esquer is looking at another 5 percent being slapped on his products — potentially increasing to 25 percent in subsequent months — unless Mexico does more to stop illegal migration through its territory by a June 10 deadline per Trump’s demand.

“Right now, more than anything there is a reaction of disbelief with everything that is going on,” Esquer, who’s been sending tomatoes and other crops to the United States for 60 years, told The Associated Press by phone during a break in the meetings.

“It also goes against the spirit there is between both countries, the agreements we have, the bilateral trade we have, which is very successful,” Esquer continued. “On the other hand, we’ll have to wait for the reaction of U.S. exporters to Mexico, because they are also going to see their exports threatened if Mexico launches some kind of mirror policy.”

From berries and automobiles to machinery and household appliances, all of Mexico’s exports stand to be hit with the tariffs. Avocado growers in Michoacan, electronics factory workers in Tamaulipas, across the border from Texas, auto parts exporters, all would feel the pinch.

Esquer, who does business from the tomato-growing northwestern state of Sinaloa, said it’s not just businessmen who stand to lose, since Mexico’s estimated 700 tomato exporters are responsible for directly generating some 450,000 jobs. According to Mexico’s Agriculture Department, last year some $2 billion in tomatoes were exported to the United States, second only to tequila and ahead of avocados.

The threat also throws into question the future of the USMCA trade deal between the U.S., Mexico and Canada, hammered out in months of contentious negotiations as a replacement for the North American Free Trade Agreement, one of the Trump administration’s most touted achievements.

Trump’s threat came the same day Mexico announced it would begin the process of ratifying the USMCA and less than two weeks after it successfully negotiated the lifting of U.S. steel and aluminum tariffs that had been a roadblock to final approval for the trade deal.

“It would really have a terrible impact on our producers and our exporters,” said Kenneth Smith Ramos, who led then-President Enrique Pena Nieto’s delegation to USMCA talks and is now an international trade consultant at Mexico City-based AGON.

“And it would hurt U.S. producers as well because they rely a lot on Mexican inputs for their production,” he added. “So it would reduce their competitiveness and force them to raise prices, which would ultimately of course hit consumers.”

That means people like Chuck Sholtis, CEO of El Paso, Texas-based Plastic Molding Technology Inc., which employs 100 people. Most of its business involves plastic injection molding for automotive, electronics and business products for maquiladoras, factories in Mexico that are run by foreign companies. Sholtis said his company has already suffered from U.S. steel tariffs on China that increased the costs of their tools, and it’s also been hit by slowdowns at ports of entry

Sholtis said the United States has found a niche in high-tech specialized manufacturing that’s part of a global supply chain. He fears that if more tariffs like this are implemented, or if the USMCA doesn’t take effect, the United States will lose its edge in manufacturing.