Mexican exporters jittery, awaiting Trump trade moves

MEXICO CITY: The bustling, cheap-labour assembly plants that dot the Mexican side of the US border are booming, but President Donald Trump’s stances on taxes and trade have them worried.

Trump wants to renegotiate the NAFTA trade agreement with Mexico and Canada, which has been in force for a generation, and his Republican Party has floated tax reform ideas that would hurt Mexican companies.

“Everyone is waiting to see what move the US is going to make,” said Mario Hernandez of KPMG, a consultant for companies that run the so-called ‘maquiladora’ plants in Ciudad Juarez, across the frontier from El Paso, Texas.

These companies provide work for 2.7 million people there and in other states near the frontier.

They import components from other countries, mainly the United States, assemble them – into appliances, medical equipment, auto parts and pieces for the aerospace industry – and then export them.

The system helps companies save money because labour is much cheaper in Mexico than in the US.

The sector’s output expanded its revenues from the equivalent of about US$128 million in 2010 to US$239 million in 2016, adding 800,000 jobs.

But alarm bells sounded in this industry in Mexico when Trump came to power in January and pledged to renegotiate NAFTA or pull out altogether if he does not win new terms that he likes.

A full 80 per cent of Mexico’s exports go to the US.

INDEX, an association that represents the maquiladora industry, says its strategy is “to be right next door” alongside Mexican officials who might end up renegotiating the North American Free Trade Agreement with the US and Canada.

Because of the uncertainty surrounding the future of NAFTA, some companies have put investment plans on hold.

Cesar Ochoa, a lawyer in Ciudad Juarez who advises companies interested in doing business in Mexico, said things have indeed been slow since the beginning of the year when Trump took power.

“I do not know if the rest of the market is in the same situation as me, but right now things are dead,” said Ochoa.

“It may be a golden age for the ‘maquiladoras’ but the only problem is that dark cloud on the horizon,” said Ochoa, insisting that companies want clearer signals from Trump as to what kind of trade ties he seeks with Mexico.

Mexico’s auto industry is also on edge about the prospect of changes to NAFTA, due to Trump’s belief that it is too beneficial to Mexico, to the detriment of Americans. — AFP