In a move that will alarm the auto industry, President Donald Trump has said the US will impose a 5% tariff (with further rises scheduled) on all goods coming from Mexico – beginning 10th June – until illegal immigration across the US-Mexico border ends.
“The Tariff will gradually increase until the Illegal Immigration problem is remedied, at which time the Tariffs will be removed,” Trump said.
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In a statement, President Trump outlined a plan to ramp-up tariffs on Mexican goods if illegal immigration is not checked. The statement said:
“If the illegal migration crisis is alleviated through effective actions taken by Mexico, to be determined in our sole discretion and judgment, the Tariffs will be removed. If the crisis persists, however, the Tariffs will be raised to 10 percent on July 1, 2019. Similarly, if Mexico still has not taken action to dramatically reduce or eliminate the number of illegal aliens crossing its territory into the United States, Tariffs will be increased to 15 percent on August 1, 2019, to 20 percent on September 1, 2019, and to 25 percent on October 1, 2019. Tariffs will permanently remain at the 25 percent level unless and until Mexico substantially stops the illegal inflow of aliens coming through its territory.”
The statement also said that “companies located in Mexico may start moving back to the United States to make their products and goods”, adding that “companies that relocate to the United States will not pay the Tariffs or be affected in any way.”
President Trump also accused the Mexican government of passive cooperation in illegal immigration and said the “mass incursion constitutes an emergency and extraordinary threat to the national security and economy of the United States.
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By GlobalData“Gang members, smugglers, human traffickers, and illegal drugs and narcotics of all kinds are pouring across the Southern Border and directly into our communities,” he said in the statement. “Thousands of innocent lives are taken every year as a result of this lawless chaos. It must end NOW!”
Mexico’s deputy foreign minister for North America, Jesus Seade, said that it would be ‘disastrous’ if the tariffs are imposed.
Trade tensions between the US and Mexico appeared to ease when the two countries – along with Canada – successfully struck a trade deal to replace the NAFTA. Automotive companies are particularly exposed on new tariffs, because of the volume of trade they do stemming from low-cost manufacturing facilities in Mexico. Analysts say that tariffs on new vehicles imported to the US from Mexico would be difficult to pass on given the competitive state of the flat US light vehicle market.
