Trump's unprecedented tariffs on Mexico incredibly bad for business: U.S. trade association leader

2019-06-02 11:08:44 GMT2019-06-02 19:08:44(Beijing Time) Xinhua English

by Julia Pierrepont III

LOS ANGELES, June 1 (Xinhua) -- U.S. President Donald Trump's unprecedented tariffs on Mexico are "incredibly bad for business and the whole country will suffer the consequences," a prominent U.S. trade association leader has warned.

Stephen Cheung, president of the World Trade Center Los Angeles, told Xinhua in a telephone interview on Friday that Trump's ill-considered 1-2 punch against China and Mexico has undermined investor confidence in the business sector, which will result in stalled growth as many companies put their manufacturing expansion plans on hold.

The Dow Jones tumbled 355 points, or 1.4 percent, on Friday to below 25,000 for the first time in months, in response to an announcement by Trump that he intends to levy a 5-percent tariff on all Mexican imports to pressure the country to halt undocumented migrants crossing the border.

The World Trade Center Los Angeles works to support the development of international trade and business opportunities for Southern California companies as the leading international trade association, trade service organization and trade resource in the Los Angeles region.

Prior to the tariff announcement, Trump had actually agreed to lift U.S. tariffs on imports of steel and aluminum from Mexico and Canada in return for both Mexico and Canada lifting their tariffs on certain American imports, such as pork, cheese and whiskey, in order to ratify the new U.S.-Mexico-Canada (USMC) trade agreement.

But, in a classic case of the left hand not knowing what the right hand is doing, on Thursday, at the very moment the administration announced it was ready to seek congressional approval of its revised trade pact with Mexico and Canada, which would preserve the ultralow tariffs originally put into place under the new North American Free Trade Agreement (NAFTA), Trump levied his 5-percent tariff on Mexico, effectively undermining the USMC trade agreement effort.

As with China, trade with Mexico is critical to the U.S. economy. According to the U.S. Census Bureau, Mexico is the third largest trading partner after China and Canada, importing 265 billion U.S. dollars' worth of goods from the United States and exporting 346.5 billion dollars' worth of goods to the United States last year, including cars, fuel, clothes, medical devices, heavy machinery, tomatoes, cucumbers, beer, grapes, snack foods, Tequila, and avocados.

Mexico is the top market for California exports, accounting for around 17 percent of California's exports. The value of California's exports to Mexico reached 30.7 billion dollars in 2018. The western U.S. state also imported 44 billion dollars' worth of goods from Mexico last year, according to data by the California Chamber of Commerce.

Trade with Mexico supports millions of jobs for Americans. Mexican companies headquartered in Los Angeles spend 426 million dollars on salaries to American employees, which is then recycled and multiplied in the American economy by a factor of 2 or 3 times, Cheung said.

"Trump's sanctions against China, one of our largest trading partners, sent businesses scrambling to find alternatives. Many turned to Mexico, but look where that got them. You can't do business in an environment this unsettled," said Cheung.

Cheung has grave concerns about the tariff's impact on the future U.S. economy. "The administration is acting unreliably and it has affected our entire country's international standing. It took us 70 years to be considered the most stable investment environment in the world. It's taken Trump just two years to undo all that."

"U.S. business policy over the last 20 years has reshaped modern day manufacturing and supply chain processes so that manufactured goods routinely combine parts that have been made in many different countries into one finished product," Cheung said.

So, levying an onerous tariff on Mexican imports will also severely penalize U.S. businesses and American employees that supply parts for many of the items assembled in Mexico.

Cheung's prediction was borne out by the recent announcement from Walmart, the largest retailer in America. Walmart said that they will raise their prices to pass on tariff increases to their customers.

Cheung pointed out that U.S. businesses and consumers will pay the price for years to come for the administration using the business and trade community as a tactical weapon to force negotiations on immigration policy.