The announcement led to widespread speculation about the potential impacts, including the possibility that Mexican retaliation “would tear through battleground states that President Donald Trump needs to win re-election, hurting the auto industry in Michigan and Ohio, dairy farmers in Wisconsin and grain and hog farmers in Iowa and North Carolina.”
Industry groups, including manufacturers and various agricultural organizations, issued dire warnings about the fallout from any such tariff policy. The powerful U.S. Chamber of Commerce is considering a legal challenge, Bloomberg said.
Jay Timmons, president and chief executive officer of the National Association of Manufacturers, called the threats “a Molotov cocktail of policy” that would have “devastating consequences on manufacturers in America.”
A top Mexican official said the country won’t retaliate before discussing the matter with the U.S. Still, the potential tariffs, “if turned into reality, would be extremely serious,” said Jesus Seade, the country’s undersecretary of foreign relations for North America.
Retaliation by Mexico is virtually certain to strike Trump’s political base in rural America, Bloomberg said. Farmers are already under strain from ongoing trade wars, low commodity prices and natural disasters, including floods across the Midwest.
Agricultural groups had been relieved just two weeks ago when the administration moved to end tariffs on steel and aluminum imports from Mexico and Canada. Now, they face the prospect Mexico will resume punitive duties on U.S. agricultural goods.
The groups say they fear that a new trade dispute will hinder ratification of the U.S.-Mexico-Canada Agreement, which they consider crucial to maintaining trade with the nation’s two largest agricultural export markets.
Dairy and pork producers will be in cross-hairs if the President resumes a trade fight with Mexico, which hit both industries with punitive tariffs in the most recent trade dispute. The country is also the largest export market for U.S. corn and wheat, and the second-largest for soybeans, behind China.
Agricultural and industrial regions played an important role in the President’s election. He won an Electoral College majority and the presidency based on a combined margin of fewer than 80,000 votes in three states: Wisconsin, Michigan and Pennsylvania.
The largest agricultural sector in each of those three states is dairy. Mexico is “our number one market,” Tom Vilsack, president and CEO of the U.S. Dairy Export Council and a former USDA Secretary of Agriculture, told Bloomberg.
Iowa, which voted for Trump in 2016 after supporting Democrat Barack Obama in 2008 and 2012, is the largest U.S. producer of hogs and of corn. North Carolina, another electoral battleground, is the nation’s second-largest hog producer.
David Herring, president of the National Pork Producers Council and a hog farmer from Lillington, North Carolina, said “American pork producers cannot afford retaliatory tariffs from its largest export market, tariffs which Mexico will surely implement.”
Trade disputes with Mexico and China already have cost U.S. pork producers $2.5 billion over the past year, Herring said. The two rounds of financial aid the Trump administration has announced for farmers “provide only partial relief to the damage trade retaliation has exacted,” he said.
Trump’s latest tariff barrage, meanwhile, would immediately hit the vast, tightly integrated supply chains of U.S. automakers, a bedrock industry in Michigan and northern Ohio, which the President carried in 2016 but are vulnerable now, Bloomberg said.
The administration already took a hit in northern Ohio in March when GM halted production at its small car factory in Lordstown, located in a region where the president had promised industrial jobs would be coming back.
Mexico is the largest source of parts for U.S.-made autos, so tariffs would increase costs for virtually every major manufacturer. Higher prices at the dealership could cut into sales that are already expected to decline for the second time in three years.
Even before the tariff announcement, General Motors Co. and Ford Motor Co. had announced plans to cut thousands of salaried jobs.
Auto industry analysts brushed aside an assertion by Trump that companies will leave Mexico and “come back home to the USA” in response to tariffs.
“Until there’s some greater certainty about how long these tariffs would be in place, nobody is going to be moving billions of dollars and putting in duplicative capacity in the U.S.,” Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research in Ann Arbor, Michigan said.
No automaker has halted production at a Mexican factory since the President took office, she added. In fact, Ford recently said it would begin building commercial vans in Mexico, while Fiat Chrysler this year reneged on plans to move heavy duty truck production to Michigan from Mexico. GM is building its new Chevrolet Blazer in Mexico, even as it plans to close four vehicle and parts plants in the U.S.
So, there are still more moving parts to U.S. trade policy just now, especially as the U.S.-China fight shows signs of becoming even hotter. Producers should watch very closely as the still uncertain details of the new tariffs on Mexico are defined and implemented, Washington Insider believes.