Quality Assurance Process Improvement: Steps, tools & Techniques
Quality Assurance Process Improvement focuses on identifying inefficiencies, eliminating bottlenecks, and implementing smarter strategies...
President-Elect Trump’s Tariff Plans for Mexico
By AMREP | Posted on December 11, 2024
On November 25, 2024, US President-elect Donald Trump revealed his intention to impose additional tariffs on imports from China, Mexico, and Canada. Specifically, he plans a 10% tariff on goods from China, and a 25% tariff on imports from Mexico and Canada. He announced that imposing the tariffs would be part of his first executive orders, which he intends to sign on January 20, 2025, upon his inauguration.
Trump explained via social media that these tariffs would remain in place until China, Mexico, and Canada take steps to address the movement of drugs and undocumented immigration into the U.S.
Trump’s announcements have already triggered a flurry of responses from Mexico’s President Claudia Shienbaum and Canada’s Prime Minister Justin Trudeau as they both try to prevent tariffs being imposed on their nations’ exports.
Here we look at whether Trump can impose tariffs on Mexico and its potential implications on Mexico manufacturing and exports.
Can the US impose tariffs on Mexico?
The United-States-Mexico-Canada Agreement (USMCA) provides for free trade among the three nations. Under this agreement, an extensive range of products, such as agricultural produce, have zero tariffs. Trump’s plan to impose tariffs on products could violate the terms of the free trade agreement as it prohibits the imposition of duties outside those already agreed upon in the agreement.
The USMCA agreement however, has an ‘essential security’ exception which allows tariffs if their imposition is necessary for national security purposes. The US could use this exemption to impose tariffs. US trade law also gives the President the ability to impose import tariffs where there are national emergencies or when the US is the subject of unfair trade and commerce practices. These could be invoked to impose tariffs on Mexican exports.
Regardless, Mexico and Canada could challenge these tariffs through the USMCA’s dispute resolution process as they would be seen as violations of the agreements.
The USMCA in 2026
The USMCA has a sunset clause whereby the agreement is to be reviewed every 6 years. The next review is scheduled for 2026, so this means that even if Trump does not impose tariffs in 2025, there is the possibility of tariff rates being renegotiated entirely in 2026. The agreement could be discarded entirely, however we view this as unlikely as many of the US border states, such as Texas and California, rely heavily on cross-border trade and have established free trade zones. To impose tariffs would create a significant conflict with individual US state economies and be extremely detrimental.
Potential Tariff Outlook
We expect costs to rise for the US consumer and businesses if President-elect Trump continues with his plan to impose tariffs. Grocery and agricultural products will see higher prices as Mexico exports a lot of its produce like avocados to the US. Our view is that even if President-elect Trump were to issue an executive order in January 2025 to impose tariffs on Canada and Mexico, these will not be able to take effect as they will violate existing free trade agreements. We feel that it will only be in 2026, when the USMCA is up for review, where the US is at far more liberty to impose tariffs without having to contend with trade agreement violations.
We feel that it is likely that the three countries will negotiate tariff rates on various products, as there will be the mutual recognition that a 25% tariff rate on Mexican and Canadian products will be destructive on the US economy, particularly the ones along the border. In short, we think that tariffs will be increased on some but not all products - it would be impossible to say at this moment which products these would be. We also note that Canada and Mexico have taken steps that could soften the US’ position - for instance, on 4 December 2024, it was announced that Mexican troops had seized the largest amount of fentanyl pills ever in the nation’s history.
What can businesses do to mitigate tariff threats?
The uncertainty over the tariff situation complicates matters for those involved in Mexican exports and manufacturing. Our sgestions are:
- Conduct detailed cost analysis to see if the decrease in the Mexican peso can still provide financial advantages even with tariffs being imposed.
- Review arrangements with Mexican logistics companies, customs brokers, shelter company service providers, and contract manufacturers to see if they have IMMEX and other duty mechanisms that can help mitigate the costs of potential tariffs. It should be noted that Mexico has its own free trade zones which were set up to encourage foreign investment and provide duty - free concessions.
AMREP Mexico is part of the AMREP Supplier Management Services group. We are a global provider of supplier management, quality control, technical recruitment, and manufacturing excellence solutions. We support companies with achieving manufacturing and sourcing success with their vendors.
Don't Forget to Share This Post
Contact Us To See What We Can Do
Call Us
Mon - Sat 9.00 - 18.00
Sunday Closed
10 - December 2024
10
December
2024
23 - October 2024
23
October
2024
QA Stands For: Understanding the Basics of Quality Assurance
The role of a Quality Assurance (QA) Specialist has become indispensable across various industries. From software development to manufacturing, these professionals...
21 - October 2024
21
October
2024
The Importance of Quality Assurance in Quality Management
Every interaction shapes customer perceptions. So, quality assurance (QA) has become the backbone of successful organizations. It’s not just about checking boxes; it’s about...
