President Donald Trump signed a plan Thursday rolling out reciprocal tariffs, which will increase the tax on imports to match tariffs that other countries put on U.S. goods.
The move could upset trade partners as well as rivals across the globe, and comes in the same week as Trump announced tariffs on steel and aluminum from Mexico and Canada.
The tariffs Trump rolled out Thursday, which increase U.S. tariffs to match those of other countries, most likely wouldn’t have a big impact on Mexico, said Citigroup’s chief Mexico economist Julio Ruiz. That’s because there are very few Mexican tariffs on U.S. goods, thanks to the free trade agreement between the two countries and Canada.
“So I wouldn’t expect a huge reciprocal tariff against Mexico,” Julio Ruiz said.
But Mexico will be hit by the other tariff move Trump made this week, when he lifted the exemptions for Mexico and Canada from his 2018 tariffs on steel and aluminum.
That tariff could increase prices for consumers in the U.S., including for cars and trucks that are manufactured south of the border, many by American companies, points out Mexico City economist Enrique Dussel Peters.
“U.S. firms in Canada and Mexico face drastic uncertainties,” Dussel Peters said.
Ford’s CEO said recently that uncertainty around tariffs is causing “cost and chaos” for American companies. He was in Washington this week to talk to leaders about the effect of tariffs on his industry. For example, Ford has a plant in Hermosillo that manufactures trucks and SUVs, many of which are shipped across the border to be sold in the U.S.
When Trump’s steel and aluminum tariff on Mexico went into effect briefly during Trump's first term, before he made an exemption for North American trade partners, it didn’t have much of a ripple effect on the rest of Mexico’s economy, Ruiz said. But the industry itself will be greatly affected.
“Strictly speaking, both sectors [steel and aluminum] account for around 700,000 jobs in Mexico,” Dussel Peters said.
Mexican officials have pointed out that the United States actually exports more steel and aluminum to Mexico than vice versa. For that reason, the country’s finance minister called the tariff “unfair.” The steel and aluminum exemptions are set to be lifted on March 12.
Trump is also set to revisit, and potentially put into place, a 25% across-the-board tariff on all goods from Mexico and Canada in early March. Unlike the tariff on steel and aluminum, economists say that measure will likely be felt throughout the economy, and potentially raise prices significantly for U.S. consumers.
