June 26, 2019
The week of May 26th the Trump Administration proposed a 5% tariff on all Mexican imports unless the Mexican government can demonstrate that it is taking concrete steps to reduce the flow of undocumented immigrants across the border.
On Monday, the Mexican government responded by implementing a plan to enforce a crackdown on undocumented migrants that includes the use of a militarized national guard on the Guatemalan border, increased arrests of undocumented migrants, and the acceptance of asylum-seekers turned away from the United States. Because of these steps, the United States government has not approved the implementation of the 5% tariff. However, President Trump has underscored that tariffs are still viable should these efforts cease or provide insufficient results, which are outlined in a plan not available for public access.
With just the threat of tariffs, shares in major companies such as General Motors, Kroger, Gap, and Macy’s decreased. They have recovered in the past week due to Trump announcing that he will be suspending the aforementioned tariff, but this fluctuation points to the likelihood of major potential decreases in the future should the tariffs actually go into effect. Furthermore, the Perryman Group, a group of economic analysts, has predicted a loss of around 400,000 American jobs as a result of the tariffs starting a trade war with the U.S.’s largest trading partner. Large and small businesses alike have expressed their disapproval of using the tariff as leverage in a political struggle with which they have no direct involvement. The tariffs would affect each state differently, and, as the 10th largest importer of Mexican goods, Georgia has a lot to lose.
In 2017, Georgia imported $6.8 billion from Mexico and exported $3.6 billion to Mexico. Furthermore, 152,000 Georgian jobs rely on this trade because of investment from 191 Mexican businesses. This trade partnership has been steadily increasing over the years making Mexico a very important trading partner for Georgia. With even a 5% tariff, the prices of goods such as food, computers, auto parts, and completed cars could increase and hurt consumers. Moreover, Georgia jobs in ports, warehouses, and transportation could be in danger with decreased Mexican trade and financial investment. If tariffs are implemented, and continue to increase, Mexico would likely decrease investment substantially, with the possibility of ceasing it completely, creating the loss of even more jobs. In response to these concerns, lawmakers have stated that a 5% tariff is not likely to hurt the economy in a major way and is simply meant to pressure Mexico into taking action. However, without free commercial trade across the border, “paperwork, logistical slowdowns, and traffic concerns” could add to the economic pressures affecting Georgia businesses.
Small businesses are especially at risk because they have less time to adjust to rapid policy changes. The majority of businesses in Georgia that import goods from Mexico have under 50 employees and instead of finding new suppliers to cut overall production costs, they will likely raise prices which affects consumers more directly, hurting their business in the long run as consumers find alternative products. A number of small businesses have already begun seeking alternative suppliers for materials imported from Mexico, but the process will have to be readjusted with each percentage increase in the tariff. Additionally, it is hard for these businesses to find suppliers that have prices that compete with their Mexican counterparts.
NOTE: The opinions expressed in this blog are the opinions of the author only. It is not to be assumed that the opinions are those of GALEO or the GALEO Latino Community Development Fund. For the official position on any issue for GALEO, please contact Jerry Gonzalez, Executive Director of GALEO at firstname.lastname@example.org.