There’s nothing like moving into a new house and giving the neighbors a run for their money as you walk through the door. That is what Trump thinks, who has announced that as soon as he takes office on January 20 he will impose 25% tariffs on all products arriving from Mexico and Canada. Until when? until the two neighboring countries achieve “than the invasion of drugs and illegal immigrants” did not reach the US. Next to nothing.
“It is time for them to pay a very high price!”the new president has written, although in all likelihood those who will pay the most will be the Americans themselves. Let’s take a practical and somewhat stereotypical case: a supermarket in the US that asks a Mexican company to send it a truck full of avocados.
If Trump complies with what he has said, when clearing customs the supermarket would have to pay the US government 25% of the value of the avocados. Since I didn’t pay it before, the supermarket must make a decision: should I sell the avocados 25% more expensive to cover the tariff? Do I deduct it from my benefit? Do I tell the Mexican company that they have to sell them to me 25% cheaper?
Trump, like a good capitalist, trusts that the American supermarket is not going to give up its profit and believes, for the same economic reasons, that it will not want to hit its customers that way because it would sell many fewer avocados. So he loves the two remaining options: the supermarket will have to switch from Mexican avocados and sell patriotic American avocados that pay no tariff, or the Mexican farmers will get annoyed and lower their prices by 25%. The problem is that it doesn’t work that way.
The first option does not have much future: Americans ate about 1.2 billion kilos of avocados in 2021, according to data from your own governmentand American agriculture has never produced more than 180 million a year (15%) and it was a long time ago. Right now the country buys 90% of the avocados it consumes abroad and almost 90% come from Mexico, so it is unrealistic to think that this volume of production can be replaced overnight: if you want your avocado, you have to pay more.
Another option, of course, is not to eat avocado, but let’s keep in mind that 60% of fresh fruit and 40% of vegetables What Americans eat comes from abroad. Of these imports, more than half of the fruit and 90% of the vegetables come from Mexico or Canada: do you like to put tomatoes on your hamburger all year round? 85% of greenhouse tomatoes come from Mexico.
But let’s not just talk about food: if Mexico sells almost 8.5 billion euros in fruits and vegetables to the US, it sells 12 times more in cars and car parts; The US buys eight million barrels of oil from other countries every day and more than half buy them from Canada. Is all this irreplaceable? No, but it is not easily replaceable. Would it hurt Mexico and Canada? Of course, but also to the US.
To begin with, Americans will pay higher prices and/or will have to change their habits because of that 25% tariff, but these types of measures are also a two-way street. Mexico and Canada are not only big sellers hoping to place their product in the US, they are also the two largest purchasing markets for American products. Their governments are likely to respond by imposing tariffs on these items: The Mexican government has already announced it and he has done it with great effectiveness in the past before other commercial disputes.
Finally, we must ask ourselves about the effectiveness of this tariff. Beyond angering his two neighbors or not, in theory the objective that Trump has set is to reduce irregular immigration and drug trafficking across borders. Is it realistic to think that a weaker Mexican economy favors these goals?
With the improvement of living conditions in Mexico, between 2007 and 2022 The number of undocumented Mexicans in the US decreased from almost 7 million to 4both for those who returned to Mexico and for those who decided not to undertake the trip. Regarding drugs, will a serious economic crisis make the Mexican state more effective against drug trafficking? Will demand for opioids in the US decrease if the economic situation worsens?
The other options, not entirely ruled out, are that Trump has set these impossible goals because he is a protectionist and just wants an excuse to impose tariffs. Or because he would settle for the Sheinbaum and Trudeau governments to suck up to him a little, but he does not expect substantial changes. Or because he has not thought thoroughly about the consequences, which would not be the first time either.
Or even, perhaps, because what he has announced is nothing more than that, an announcement. A post on a social network. On January 20 we may find an executive order, or not, and that order may say what the post said, something a little different, or something completely different. Trump is back and this uncertainty is also part of the return.
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