Seven out of ten products manufactured by Mexico are destined for one country: The United States. US tariffs on Mexico will strongly affect five classes of items in particular.
Over the course of many decades, Mexico has developed a strong dependence on what is undisputedly the world’s largest economy. Over the course 2018, for instance, Mexico exported a total of US $379.9 billion worth of its products to its neighbor to the north. This figure is 352% more than the one that was registered twenty years prior. Taking this consideration into account, the threat of imposing US tariffs on Mexico of 5% on all imported Mexican goods would be a serious blow to that nation’s economy.
According to US President Donald J. Trump on Twitter, the measure will enter into force on June 10 and will remain in force “until the flow of undocumented migrants’ that arrive in the United States through Mexico is stopped. Furthermore, the president stated that US tariffs on Mexico “will gradually increase until the problem of illegal immigration is resolved.” Levies on Mexican products could reach a maximum rate of 25%. Mexico’s President, Armando Manuel Lopez Obrador, has called for negotiations to avoid a possible trade conflict.
What are the five classes of products that Mexico exports to the United States that could be most affected by US tariffs on Mexico?
Vehicles and Auto Parts
One-quarter of Mexican exports to the United States originate from the nation’s modern and well-developed automotive and vehicle industry. According to official figures provided by Mexico’s federal government, passenger vehicles are the source of 9.8% of exports from Mexico to the United States. The value of these vehicles is approximately US $30 billion. In addition to automobiles, 7.5% of Mexico’s exports to the United States is comprised of auto parts that have a total value of approximately US $30 billion. Finally, 7.4% of the total value of Mexican exports to the United States comes from the sale of trucks into the US market. These products have a value of US $22.8 billion. US tariffs on Mexico in this product category will have a significant impact on the prices that are paid by American consumers.
The manufacturing of computer equipment in Mexico has registered significant growth in recent years. In 2017, the value of computers and peripherals shipped to the United States made up 6.3% of Mexican product shipped to that country. The total estimated value of these items was US $19.4 billion.
Samsung, LG, Toshiba, Foxconn, Flextronics, and Intel are among the leading international firms that have a strong presence in Mexico. US tariffs on Mexico would affect the prices paid for their products by American buyers.
In 2017, the overall value of Mexican agricultural goods that were exported to the United States had an estimated value of US $500 billion dollars. This figure represents 4.1% of the value of the exports that Mexico sends to its northern neighbor. The value of the sale of products from the Mexican countryside exceeded the value of Mexican crude oil sales to the United States, which were only valued at approximately US $10.3 billion. US tariffs on Mexico on agricultural products will have an effect on the price of the food that reaches American dinner tables.
With just over US $12 billion in sales, the cell phone industry has positioned itself to be among the goods most exported to its neighbor to the north. The manufacturing of mobile communications devices is the second largest export in the electronic goods sector. It represents 3.9% of the value of exports to the United States.
During the last decade, Mexico became the worldwide leader in exports of flat screen TVs. Mexico shipped US $10.4 billion dollars worth of this product to the United States in 2017. The sale of flat screens comprised 3.4% of all Mexican exports to the US. The US tariffs on Mexico that have been proposed will have an effect on this product, as well. For the most part, the manufacture of flat-screen TVs in Mexico takes place in the border city of Tijuana by companies such as Samsung and Sony.