June 18, 2019

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New Tariffs: Impact on US-Mexico Trade Industry

On May 30, United States President Donald Trump announced plans to impose new tariffs on all products imported from Mexico to the United States. Such an act would significantly impact binational trade and especially those sectors that have integrated supply chains, such as the automotive, agriculture, clothing, alcohol, electronic devices, and oil and gas industries.

Mexico is the United States’ largest commercial partner, so this proposed tariff action would impact not only Mexican businesses, but American consumers, who would face higher product costs. This measure would especially affect those states dependent on the import of key raw materials for manufacturing, including Texas, California, Illinois, Michigan, Louisiana, Pennsylvania, Ohio and New York. Despite assurances from both sides, the threat of these new tariffs has also inserted new uncertainty into efforts to enter the United States-Mexico-Canada Agreement.

In Mexico, this situation has also awakened new uncertainty in the automotive, especially among brands already facing low sales. The tariff increase could significantly increase costs affecting beer and tequila, as well as key computer technologies.  Several associations of agricultural producers of products such as corn, tomato, avocado and pork among other products are also preparing for potential tariffs.

President Trump plans to gradually increase the tariffs from 5 percent to 25 percent between June and October, unless Mexico takes actions to stem the flow of migrants into the United States.  Specifically, the White House advises that the tariff rate will increase by 5 percent on June 10; 10 percent on July 1; 15 percent on  August 1; 20 percent on September 1; and 25 percent on October 1, remaining at this level indefinitely, pending action by Mexico.

The Mexican President Lopez-Obrador sent a letter inviting President Trump to resolve the differences diplomatically, based on dialogue and cooperation. On June 3, a Mexican delegation made of Mexican Foreign Affairs Secretary, Marcelo Ebrard; Mexican Economy Secretary Garciela Márquez; Mexican Under Secretary for North America Jesus Seade, and others, began talks with Secretary of State Mike Pompeo and U.S. Trade Representative Robert Lighthizer to come to an agreement. According to Mexican Foreign Affairs Secretary Ebrard, Mexico is expecting to have an answer by June 7. Republican lawmakers have already expressed deep concerns with the threatened tariff action.

Further information is expected in the coming days. This post will be updated at that time.

© Copyright 2019 Squire Patton Boggs (US) LLP

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About this Author

Mayte G. Fedowitz International trade Squire PB
Public Policy Adviser

Mayte Fedowitz is a member of our International Public Policy Practice and previously served as a Congressional Affairs Advisor and Liaison at the Embassy of Mexico in Washington DC. As a public policy advisor, she assists sovereign governments in understanding US government policies. Her experience in the private and public sector enables her to strategically guide clients in the public policy arena to leverage their relationships and advocate policy objectives.

As Congressional Affairs Liaison, Mayte conducted political analyses and expanded a strategic...

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Ludmilla Kasulke International Trade Attorney
Associate

Ludmilla (Milla) Kasulke draws on her experience in both domestic and international policy to assist clients on trade matters. Milla provides multinational corporations, sovereign governments and entities, and quasi-government entities with advice on a wide range of trade policy, legal, and regulatory issues. She has been actively engaged in all aspects of the Section 232 process, including the exclusion petition process, and regularly advises clients on the impacts of current and potential new actions. Milla also regularly counsels clients on the impacts of current and potential new trade negotiations, including the US-Mexico Canada Agreement (USMCA) and US-Japan and -EU talks.

Prior to law school, Milla was the special assistant to the chairman of the White House Council on Environmental Quality, where she gained first-hand experience in the daily operations of the executive branch. While at the council, she worked closely with the chairman and his team of policy advisors in the development and management of significant administration policies and programs, such as the Major Economies Meetings on Energy Security and Climate Change.

While in law school, Milla served as the assistant to former White House Counsel and former US Ambassador to the European Union C. Boyden Gray. She was elected as a vice president on the executive board of the Student Bar Association, where she represented part-time student interests. Additionally, she was an active member of the Georgetown Journal of Law & Public Policy staff, where she served as a symposium director.

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