Closed Mexico border would spread pain
Food prices and availability, American jobs could suffer
A Trump administration shutdown of the U.S.-Mexico border would quickly spread across the economy, spiking fruit and vegetable prices, spawning food shortages, shutting production lines and throwing Americans out of work, at least temporarily.
“With thousands of trucks and trains and cars crossing the border each day, you’d have huge backlogs, rotting produce and ripple effects across the supply chain,” says Dan Griswold, senior research fellow and trade expert at George Mason University. “The effect would be immediate and devastating for industry.”
President Donald Trump is threatening to close the border unless Mexico takes steps to stop a wave of migrant families, mostly fleeing Central American countries with high levels of poverty and violence, from reaching the U.S. border.
The impact would be widespread because the supply chains of U.S. and Mexico are so tightly integrated and “just in time inventory” has manufacturers and retailers carrying limited stocks to reduce costs, Griswold says.
With about $1.7 billion in goods crossing the border every day, the effects would dwarf the fallout from the 10% tariff Trump has slapped on more than $200 billion in imports from China, says Gary Hufbauer, senior fellow at the Peterson Institute for International Economics.
“This will be a real shock,” Hufbauer says.
The U.S. imported $346 billion in goods from Mexico last year and exported $265 billion in products to the country. Of the $611 billion in trade between the two countries, $502 billion crossed the border in trucks and trains last year, according to the Commerce Department.
More than 13% of all U.S. imports come from Mexico. Shipments from Mexico make up more than a third of all auto and auto-part imports, nearly half of imported vegetables and 40% of imported fruits, according to the Peterson Institute and the U.S. Department of
Agriculture.
The effects would be far more punishing for Mexico, which could slip into recession, Hufbauer says. Border trade represents 37% of Mexico’s gross domestic product compared with about 2% of U.S. GDP, according to Moody’s Analytics.
Economist Hoyt Bleakley of the University of Michigan likened a brief shutdown of a few days or a week to a blizzard that does little damage to the economy as shippers rapidly catch up.
Even a prolonged shutdown that lasts a few months likely would shave quarterly U.S. economic growth by just two-tenths of a percentage point, still fairly modest, Hufbauer says. A shutdown, he says, could have broader effects by hurting business confidence.
About 5 million American jobs depend on border trade, according to the U.S. Chamber of Commerce.
Here are the potential effects on consumers and businesses:
Automakers in the cross hairs
A border shutdown would be “devastating” to American auto companies, their workers, auto parts suppliers and regional economies throughout the Midwest, Texas and California, industry experts said Tuesday.
Not only do parts come into the U.S. from Mexico, but 37% of U.S. parts are exported to Mexico, said Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research in Ann Arbor, Michigan. A disruption in the supply chain risks shutting down factories and bigger production operations that can’t easily restart. It affects hundreds of thousands of people immediately, she said.
“We have seen Mexico earthquakes, coastal labor disputes at ports of entries and tsunamis. All pale in comparison to the impact a prolonged border shutdown would have on suppliers, dealers and industry employees,” said Jeoff Burris, founder of Plymouth, Michiganbased Advanced Purchasing Dynamics, a supply chain consultant to auto suppliers primarily in North America.
“A shutdown would be disastrous for hundreds if not thousands of suppliers on both sides of the border,” he said.
Very simply, Dziczek said, a border shutdown would shut down all U.S. auto manufacturing within a week and “crash the economy.”
Where are my fruits and vegetables?
“It’s going to be insanity,” said Phil Lempert, founder of supermarketguru.com. Mexico is the top supplier of fruits and vegetables to the U.S., with $13 billion imported from the country last year.
A border shutdown would be felt at American dinner tables almost immediately because fresh produce can’t be warehoused for more than a few days, says Scott Vandervoet, whose family owns Vandervoet and Associates, a Nogales, Arizona, business that sells and markets produce imported from Mexico.
“There is no standing inventory of fresh produce because it’s perishable,” Vandervoet said,
Most affected would be avocados. The shortage would be acute because of a recent multistate avocado recall, a planting season that hasn’t even begun in California and forecasts predicting a weak growing season.
“If the border is shut, we have about three weeks’ worth of avocados in the U.S.,” Lempert says.
Blueberries, raspberries and strawberries also could be scarce, though Lempert said a berry shortage could be mitigated with imports from Chile and domestic production.
Ground beef might also be in short supply. He anticipated a price hike of at least 10%.
A border shutdown also would cripple the produce industry in border cities such as Nogales, Arizona, where 60% of winter vegetables imported from Mexico pass through the port daily headed for U.S. grocery stores and restaurants.
“Any sort of protracted delay would be disastrous. Even a one-day closure would be devastating,” said Lance Jungmeyer, president of the Fresh Produce Association of the Americas, a Nogalesbased trade group that represents businesses that grow, import and distribute produce from Mexico.
To ensure produce is delivered fresh to grocery stores, distribution companies only warehouse about two or three days worth of inventory.The companies would be forced to lay off workers “because there is simply no work for them to do,” which would, in turn, hurt the local economy, Jungmeyer said. “As those employees are laid off, they would not be able to go to the stores, and those companies would also suffer.”
On a daily basis, 1,200 trucks carrying on average 40,000 pounds of produce imported from Mexico pass through Nogales, Jungmeyer said. That’s about 50 million pounds a day, he said.
Del Campo Supreme, a tomato distribution company in Nogales, already is getting calls from U.S. supermarket chains worried that a border shutdown will affect the supply of tomatoes from Mexico, said Jim Munguia, the sales manager.
Munguia is telling them if the shutdown only lasts a day, there will be no impact, but if the border shutdown drags on for more than a few days, the inventory will quickly dry up, because tomatoes from Mexico won’t be able to get into the U.S., he said.
Local merchants would be hurt
Mexicans regularly cross the border to go shopping before returning home.
Border communities such as Nogales depend on sales taxes as a key source of revenue.
“Retailers in the U.S. border cities know how critical Mexican residents who cross the border and shop for food, clothing, auto parts, and other retail items on the American side are for their business revenues,” wrote Vera Pavlakovich-Kochi, an associate professor of geography at the University of Arizona, in a February update.
A true shutdown would imply nobody could traverse the border by car, bus, or on foot, heading either north or south. Arizona businesses such as hotels, restaurants and various stores could feel the pinch from a drop-off of foreign tourists.
And perhaps more troublesome: How would Americans vacationing in Mexico return home, and vice versa?
“If the border is shut, we have about three weeks’ worth of avocados in the U.S.” Phil Lempert, supermarketguru.com
Contributing: Phoebe Wall Howard, Detroit Free Press; Daniel Gonzales, Russ Wiles and Rafael Carranza, Arizona Republic; Joel Shannon, John Fritze and Eliza Collins, USA TODAY