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Mexico Ducks Tariffs for Now, But Laredo Will be Key Indicator

Republican President Donald Trump on Saturday announced sizable new tariffs on imports from Canada and China that will go into effect tomorrow, prompting retaliatory tariffs that could make many goods more expensive in the U.S.

But Mexico has, for now, ducked similar tariffs. Mexican President Claudia Sheinbaum on Monday announced a deal with the Trump administration to put off those tariffs for a month, in exchange for a stronger military presence along the country’s northern border aimed at curbing the flow of illegal drugs and migrants across the border.

Still, if Mexico can’t reach a deal to hold off the tariffs after a month, the largest trade port with Mexico, in Laredo, would be a key indicator of their long-term consequences.

Trump declared an economic emergency to enact the new tariffs, which aim to squeeze those countries to limit the production and export of fentanyl and to reduce illegal immigration to the U.S., in order “to protect Americans,” he wrote on social media.

The U.S. will levy a 10% duty on all imports from China, while Mexican and Canadian imports would have carried a 25% tariff. For the next month, only Canadian imports will face that tax. Canadian electricity, oil and natural gas also will be subject to a 10% tariff.

The tariff rules also don’t allow for any exceptions, which could hurt homebuilders, farmers, automakers and others, a senior U.S. administration official told the Associated Press. And there aren’t specific criteria for lifting the tariffs, that official said, only fewer American deaths from fentanyl.

Economists have warned that the new tariffs could raise prices for Americans while slowing growth and spurring inflation, including most recently a study from Yale’s Budget Lab.

Trump over the weekend conceded that the change could hurt Americans.

“WILL THERE BE SOME PAIN? YES, MAYBE (AND MAYBE NOT!),” Trump said in a social media post, as quoted by the Associated Press. “BUT WE WILL MAKE AMERICA GREAT AGAIN, AND IT WILL ALL BE WORTH THE PRICE THAT MUST BE PAID.”

The announcement also sent shockwaves through the market on Monday, dropping the S&P 500 by as much as 1.9% early in the day, though Mexico’s announcement brought those losses back up slightly, according to the AP.

Trump’s tariffs left Mexico and Canada feeling betrayed and prompted vows to retaliate with tariffs of their own.

Canadian Prime Minister Justin Trudeau already has announced matching 25% tariffs on up to $155 billion in U.S. imports.

Trudeau reminded Americans of the two countries’s long history serving together in wars throughout the 20th century and into the 21st, and has reliably come to the aid of the U.S. to respond to natural disasters.

“The actions taken today by the White House split us apart instead of bringing us together,” he said in his announcement of the new tariffs.

On Saturday, Mexico’s Sheinbaum sharply criticized the Trump administration and ordered a tariff plan on Saturday in response.

“We categorically reject the White House’s slander that the Mexican government has alliances with criminal organizations, as well as any intention of meddling in our territory,” she wrote in a post on social media.

China also denounced the new policy. Its Ministry of Foreign Affairs declared that China “firmly deplores and opposes this move and will take necessary countermeasures to defend its legitimate rights and interests.”

The Chinese Ministry of Commerce said it would file a lawsuit with the World Trade Organization for the U.S.’s “wrongful practices.” 

On Monday, Sheinbaum agreed to deploy 10,000 members of the Mexican National Guard to the northern border as a deterrent for migrants and drug traffickers, while the U.S. will pause the tariffs on Mexico and “work to stop the trafficking of high-powered weapons to Mexico.”

In the meantime, several of Trump’s cabinet members will be in negotiation with “high-level Representatives of Mexico” to reach a more permanent deal, Trump wrote on social media.

If Trump reinstates the new tariffs, analysts will be watching the port of Laredo as a bellwether for the long-term consequences of the tariffs, Texas Public Radio reported. With an average of 20,000 truck crossings daily, it is the country’s largest trade port with its largest trade partner. Traffic through Laredo and warehouses downstream in San Antonio will indicate how businesses are handling those added costs.

A senior executive from IBC Bank expects that the Texas economy likely won’t see long-term consequences from any tariffs on Mexico until they’ve been in place for more than three months, he told TPR.

Sam Stockbridge
Sam Stockbridge
Sam Stockbridge is an award-winning reporter covering politics and the legislature. When he isn’t wonking out at the Capitol, you can find him birding or cycling around Austin.

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