Businesses view new tariffs with trepidation
Many hope Trump will backtrack from threats
NOGALES – Miguel Suarez remembers the lengthy, convoluted process used to apply tariffs on Mexican imports to the United States more than 25 years ago, before the North American Free Trade Agreement eliminated most of them.
Soon after that, he started his own distribution company, MAS Melons & Grapes, in Nogales.
Now, after President Donald Trump’s announcement Thursday, he faces the prospect of reintroduced tariffs on items from fruits and produce, to TVs to cars, to pressure Mexico to step up its immigration enforcement.
“To me, it’s very sad to go back to the situation that we were in before, for another problem that they’re trying to solve, but that has nothing to do with this,” Suarez said.
Along the U.S.-Mexico border, customs brokers, distributors, and companies that engage in cross-border trade are left to figure how Trump’s an
nouncement to impose tariffs on Mexican imports could impact them if they go in effect.
The tariffs could reach as high as 25% by October.
With the first round of tariffs approaching, 5% by June 10, border businesses are weighing their options: take the threat seriously and start preparing now or wait to see if Trump backtracks.
He has backed off of similar threats in the past, such as closing the U.S.-Mexico border.
Guillermo Valencia is with the Nogales U.S. Customs Brokers Association and chairman of the Santa Cruz County Port Authority, Valencia said there’s little choice but to take the threat seriously.
“You just never know with him, so you have to take it as if he means it, and go from there. We think it’s serious,” Valencia said. “You’re dealing with people’s livelihoods, and we wouldn’t want any president to fool around and make statements that he’s not serious about.”
Plan generates immediate controversy
On Thursday, Trump announced the U.S. would begin imposing tariffs on all Mexican imports to pressure the Mexican government into stepping up immigration enforcement policies and containing the flow of migrants reaching their shared border.
The first round would go into effect on June 10, going up five percentage points each month thereafter, up to 25% in October, “until such time as illegal migrants coming through Mexico, and into our Country, STOP,” Trump tweeted Thursday night.
The announcement irked many business leaders in Arizona and around the country, who criticized the president for using tariffs, and their potential economic impact, to advance immigration policy.
Gary Hufbauer with the Peterson Institute for International Economics said Trump’s decision is completely legal, though he described it as “preposterous.”
“Under IEEPA, the law he cited, the International Emergency Economic Powers Act, passed in 1977, he has the authority to do this under U.S. law,” he said, noting that it was intended to be used as a tool against U.S. adversaries.
“He’s got the law with him, but God knows if he has common sense with him, that’s another question,” he said.
Mexico’s president responded late Thursday with a public letter saying his government is already acting but denounced “coercive measures” to tackle the issue
He also dispatched his foreign minister to Washington, D.C., Friday to negotiate ahead of the June 10 deadline.
Little time to prepare
A short window, about eight business days, remains either for the president to change his mind, or for businesses to get everything in place.
Lance Jungmeyer with the Fresh Produce Association of the Americas said the tariffs would significantly disrupt businesses engaged in crossborder trade.
Since NAFTA did away with them, “most companies don’t have the right paperwork in place to even pay duties or tariffs,” he said.
On top of that, the process to file the paperwork and to set up payment options for businesses to pay for the tariffs can take between 7 to 10 business days, he said.
“One of the tariffs is on June 10. We’re already beyond the threshold time when a company can reasonably set that up,” Jungmeyer said. “So from produce to who knows what other items, if that company isn’t already set up to be paying tariffs, they gotta scramble on that today.”
The association said they’re hosting a seminar for its members on Monday to explain the process and procedures needed so they can get ready, just in case.
Who will absorb the costs?
Businesses like MAS Melons & Grapes have seen trade grow drastically over nearly three decades without tariffs, prompting other concerns. Mikee Suarez, Miguel Suarez’ son, said because of market demand from U.S. consumers, they expect to import a record crop of 22 million boxes of table grapes from Mexico. The import season started in early May and is expected to last until July.
The U.S. Department of Agriculture has not been able to complete the necessary inspections each day to keep up with increase in demand, he said.
“There’s not enough people, and too many boxes,” Mikee Suarez said.
That leaves him wondering what will happen if the U.S. government moves forward with tariffs.
“How are we gonna be able to meet this, if they cannot even meet what they’re supposed to do?” he said.
Miguel Suarez said the company likely will have to absorb the costs of any tariffs placed during the season because contracts and pricing already have been negotiated months in advance.