If Donald Trump’s threats materialize, Mexican and Canadian products will face a 25% tariff to enter the U.S. market starting this Saturday. The economic repercussions for Mexico and the U.S. would be considerable and affect not only the producers in both countries but also U.S. consumers, according to economists consulted by CNN.
Trump told Republican members of the House of Representatives on Monday that his administration plans to impose tariffs on pharmaceuticals, medications, chips, semiconductors, steel, and other industries. To avoid these tariffs, he said companies would need to build their plants in the U.S.
This rhetoric began during his campaign, when he proposed tariffs of up to 20% on imports, specifically a 25% tariff for Mexico and Canada, and 60% for China, as a negotiation tool.
He also called for an analysis of whether the U.S.-Mexico-Canada Agreement (USMCA) affects U.S. companies and workers, and whether the U.S. should remain in it.
A truck loaded with pickups moves toward the U.S. border at the Otay commercial port in Tijuana, Baja California, Mexico, on November 26, 2024.
On Thursday, Trump reaffirmed from the White House that he maintains his intention, and on Friday, White House Press Secretary Karoline Leavitt said: “I can confirm that tomorrow, the February 1 deadline set by President Trump will continue as announced several weeks ago.”
Before Trump assumed the Presidency, Mexican President Claudia Sheinbaum stated that migration issues and drug trafficking would not be solved with tariffs and that Mexico would respond in kind: “A tariff will be met with another in response, and so on, until we put common businesses at risk.”
Sheinbaum is confident the measure won’t materialize, but if it does, she says Mexico has a plan to face it, although she hasn’t explained it yet.
“We don’t think it will happen, honestly. But if it does, we also have our plan, we’ll inform you about it. But we don’t think it will happen,” said the president in a press conference on Wednesday.
If tariffs become a reality on February 1, how should Mexico react and who would be the most affected by this measure?
The Start of a “Tariff War”?
Economist and director of the observatory México, ¿cómo vamos? Sofía Ramírez said that Mexico should respond proportionally with tariffs on U.S. products.
“If the U.S. imposes tariffs on us, Mexico must respond with tariffs of the same magnitude and in the same measure. Tariffs on all products, if they impose tariffs on all products, we return with tariffs on all products, sectoral tariffs, we return with sectoral tariffs, up to the volume of damage caused by the tariffs,” said Ramírez.
This response, Ramírez added, would be part of a negotiation strategy that would also include the migration issue, something President Trump has used in his strategy to “put pressure” on other topics.
This is not the first time there has been a “tariff war” between Mexico and the U.S.
In 2018, during his first term, Trump imposed tariffs on steel and aluminum from Mexico. In response, Mexico imposed tariffs on U.S. agricultural products and others.
In June 2019, both governments removed the tariffs. Mexico’s Ministry of Economy at the time stated that “the retaliation strategy against certain U.S. products, including agricultural ones, was crucial” for the U.S. to backtrack on the tariffs on Mexican steel and aluminum.
Carlos Aguirre, professor of Global Business at the Universidad Iberoamericana, indicated that any retaliation by Mexico could trigger a harmful escalation of tariffs for both economies, similar to what happened with China, “the only country that began responding to Trump from his first administration with retaliatory tariffs.”
Aguirre emphasized that in the case of China, the measures were implemented gradually: “Trump started little by little,” with a process that involved applying tariffs on specific products in several stages.
According to the professor from the Universidad Iberoamericana, if Trump decides to apply a blanket 25% tariff on all Mexican products, “we would be talking about something atypical.” This type of measure would be more radical than what happened with China, where these taxes were established in several phases.
Consumers, the Possible Affected
The consequences of the tariffs wouldn’t only be for businesses, but also for U.S. consumers, according to both interviewees.
Sofía Ramírez pointed out that “clearly, U.S. consumers lose,” as tariffs would make intermediate products in the supply chains more expensive, particularly in the automotive industry. She also highlighted that “the automotive industry, although more important in Mexico, is still a highly significant sector for Donald Trump’s political base.”
Aguirre believed the tariffs would immediately impact the consumer. “The first consequence will be for the producers or Mexican exporters, because suddenly their products will have a 25% higher cost when sold in the U.S.,” he explained.
Consumers would also face potential inflation. “There will be an inflationary effect, and this risk is what the Trump administration runs to force the return of certain industries to the U.S.,” said Aguirre.
The academic from the Universidad Iberoamericana analyzed that U.S. exporters would also be affected, although to a lesser extent because the foreign trade from the U.S. to Mexico is not the same in the opposite direction.
In 2024, the U.S. imported $46 billion in agricultural products from Mexico, according to the Department of Agriculture, including $8.3 billion in fresh vegetables, $5.9 billion in beer, and $5 billion in distilled liquors.
The largest category of agricultural imports was fresh fruits, at $9 billion, of which $3.1 billion was just avocados.
According to the Department of Commerce, the U.S. also imported motor vehicles from Mexico worth $87 billion and vehicle parts worth $64 billion in 2024, not including December.
In 2024, the U.S. accounted for 40.2% of Mexico’s total imports, representing $231.68 billion.
U.S. purchases of oil or bituminous minerals were Mexico’s largest import, amounting to $28.64 billion.
The Most Affected Sectors
The economic impact would also affect strategic sectors in Mexico. Both experts agree that the agricultural and automotive sectors would be the most impacted, as they are highly integrated with the U.S. economy.
Among the most affected sectors in Mexico, Ramírez mentions exporters of products such as avocados and craft beer, highlighting that these products “would become boutique products” in the U.S. if 25% tariffs were imposed. This would affect not only large producers but also small sectors that are part of the supply chains, such as artisanal products.
In addition to the immediate economic effects, Ramírez emphasized that “the damage from delays in securing investments will be significant,” as investors might choose to wait before making decisions due to the uncertainty created by the measure.
This would directly affect the Plan México, presented by Sheinbaum, which seeks to strengthen the national industry in the “long term,” also contemplating attracting national and foreign investments of $277 million.
The impact would be direct on Mexico’s economic growth, especially in key sectors like manufacturing, which could face considerable losses if the tariffs remain long-term, said Ramírez.
“The national industry that exports to the U.S., and the investments Mexico has attracted, would also be affected. Companies that established themselves in Mexico to avoid tariffs the U.S. imposed on China would also have to absorb the costs of new tariffs on Mexico,” warned Aguirre.
Although this could be a temporary measure to negotiate, the long-term damage would be “brutal” for Mexico if these tariffs persist, concluded Sofía Ramírez. The economist suggested that the best-case scenario would be reaching an agreement that eliminates the tariffs definitively and maintains the U.S.-Mexico-Canada Agreement (USMCA).