The United States has launched another tariff battle against one of its largest trading partners: Mexico.
Last night, President Donald Trump threatened to impose a 5% tariff on all imports from Mexico starting June 10 — unless the United States’ southern neighbor takes steps to halt the flow of Central American migrants passing through the U.S. border.
Wall Street subsequently reacted in the red, with the Dow Jones Industrial Average sinking more than 250 points, or 1.29%, to 24,845 points. The S&P 500 dropped 28 points, or 1.11%, to 2,757 points, while the Nasdaq Composite declined 83 points, or 1.46%, to 7,457 points.
On Twitter, Trump wrote, “Mexico has taken advantage of the United States for decades. Because of the Dems, our Immigration Laws are BAD. Mexico makes a FORTUNE from the U.S., have for decades, they can easily fix this problem. Time for them to finally do what must be done!”
The move comes less than a day after the White House sought formal approval of the United States-Mexico-Canada Agreement, threatening to derail a deal that has taken more than a year of bitter negotiations to reach.
Investors also remain concerned over trade relations with China after talks fell through early this month. Three weeks ago, Washington increased levies from 10% to 25% on $200 billion worth of Chinese products, leading Beijing to retaliate with duties of 5% to 25% on $60 billion of U.S. goods. The Office of the U.S. Trade Representative also released a separate list of imports, including footwear, that could be hit with another proposed 25% hike in tariffs.
Companies whose supply chains are based in China have already begun to reassess and recalibrate their strategies, whether through relocation to nearby countries or reluctantly increasing costs for consumers.
The American Apparel & Footwear Industry — which yesterday sent a joint letter with four major footwear organizations to Trump opposing the proposed China tariffs — condemned the president’s latest actions against Mexico.
“By imposing escalating tariffs on Mexico, our second-largest export market and third-largest trading partner, President Trump has again chosen to increase taxes on U.S. businesses, American workers and American consumers,” said president and CEO Rick Helfenbein. “Americans will pay more for everything from jeans to cars to computers to machinery … The bottom line is that these tariffs are disastrous for the American economy.”
The Footwear Distributors & Retailers of America also issued a statement, valuing U.S. footwear imports from Mexico at $500.2 million in 2018 — up 20% from 2017 to become the second biggest year on record.
“We are deeply concerned about the president’s continued use of tariffs as a political weapon,” said president and CEO Matt Priest, who also signed the footwear industry’s letter of opposition. “Mexico serves as a strategic sourcing location for certain brands wanting to make quality leather shoes close to market. Adding higher costs on these shoes from Mexico not only raises rates, but it will start to limit product we see on store shelves.”
According to the National Retail Federation, U.S. retailers imported $128 billion in goods from Mexico in 2017 (the last year the data was available).
“The growing tariff bill paid by U.S. businesses and consumers is adding up and will raise the cost of living for American families,” added David French, SVP for government relations. “Forcing Americans to pay more for produce, electronics, auto parts and clothes isn’t the answer to the nation’s immigration challenges, and this certainly won’t help move USMCA forward.”
This story was updated with comments from the FDRA and the NRF.
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