President Trump’s last-minute immigration deal that staved off threatened tariffs on Mexican imports let businesses breathe a short sigh of relief.
But only a short one, because the president left on the table the possibility he might still hit the country with duties if he sees fit. It’s a prospect that business executives and economists say might further undercut an American economy in which growth has already been hampered by a trade war intensifying since last year.
“The threat of tariffs is still hanging over every American business and every American family,” said Tori Whiting, a trade economist at the Heritage Foundation. “Until the administration comes out and says these tariffs are no longer on the table because we recognize they’re a tax on Americans, it’s absolutely still looming.”
Trump’s abrupt announcement of the duties in late May further rattled financial markets already concerned that his trade policies, including new tariffs on China after trade talks stalled, would hurt business. Both the blue-chip Dow Jones Industrial Average and the S&P 500 have lost 2% of their value since the end of April.
The 5% levies on $346 billion of Mexican goods were to take effect June 10, then increase every month until reaching 25% in October.
Even after announcing the agreement that would forestall them, the president made clear the charges were only “indefinitely suspended.” The U.S. “can always go back to our previous, very profitable, position on tariffs,” he said.
Businesses, especially small companies and farmers, have objected repeatedly to that characterization, as well as to the implication that tariffs are picked up by trading partners. The duties are paid by U.S. buyers when their purchases arrive in port.
Trump’s position that tariffs can be wielded as a “great negotiating tool” and a “great revenue producer” creates uncertainty over what action he might take in the future and is hampering corporate America’s ability to make long-term plans that might include new business lines and building factories, analysts say.
“It makes planning for the future difficult,” Whiting said. “Businesses thrive on certainty. They thrive on knowing their regulations and how they can comply, what their tax rates are going to be.”
As a result, companies that buy goods from Mexico are already keenly following the next round of talks between U.S. and Mexican officials on immigration.
Mexican Foreign Minister Marcelo Ebrard said the country negotiated a 45-day window to demonstrate the effectiveness of its efforts to reduce illegal immigration. The agreement between the two countries states that “discussions on the terms of additional understandings to address irregular migrant flows and asylum issues” will be announced within 90 days if needed.
It’s a timetable businesses worry will lead to a reprisal of the conflict sooner rather than later. The potential duties left U.S. automakers, already reeling from slumping sales and layoffs, bracing for higher costs and bruised sales since their sprawling supply chains crisscross the Canadian and Mexican borders.
In 2018, the U.S. brought in $93 billion in vehicles from Mexico and nearly $59.4 billion in automotive parts, according to government data.
“The threat to the auto industry was pretty substantial,” said Kristin Dziczek, vice president of industry, labor, and economics at the Center for Automotive Research. “They have great integration in North America between the U.S. and Mexico and Canada, and I think more of a concern was that there was just no planning, no time.”
Most automakers will now operate under the assumption that the issue might return, Dziczek said. “There are people in strategy and planning and supply chains playing whack-a-mole,” she said. “You make a plan, and then the plan changes because something else happens.”
The possibility of duties on Mexican imports despite a recently negotiated trade agreement, which the administration is still trying to convince Congress to approve, coupled with the collapse of trade negotiations with China that the White House had said were near completion, has left businesses unsure of what they can count on.
“Among the worst things for businesses are uncertainty and volatility,” said Tom Linebarger, the CEO of manufacturer Cummins Inc. and chairman of the Business Roundtable’s trade committee. Cummins, which builds natural gas and diesel engines used in light trucks, buses, and recreational vehicles, has a market value of $25.9 billion.
Trump, for his part, appears to be emboldened by the economic showdown with Mexico and set on using the duties as leverage.
The president has promised to impose tariffs on an additional $300 billion in Chinese imports if Beijing doesn’t reach an agreement with the U.S. and boasted last week such a deal would take shape “because of tariffs.”
He also took aim at France, suggesting increased levies on French wines could be coming.
Tariffs wielded to extract concessions from trading partners cause “more harm on America than they do on anyone else,” Whiting said.
“They’re a self-inflicted wound on the American people and American business, and I think there is a significant misconception in Washington and around the country that tariffs are paid by somebody else, a tax paid by China or Mexico, but that’s simply not the case,” she explained. “They’re a tax paid directly by American businesses and are often passed down to American consumers.”
