Uncertainty around President Donald Trump’s proposed tariffs and trade policy is putting businesses on America’s southern border on edge. With stiff duties possibly coming as soon as March 1, it’s forcing companies to put spending and hiring decisions on hold.
The 15-million-person region along the US-Mexico border, with cities such as San Diego; Tucson, Arizona; and El Paso, Texas, is rich in businesses from manufacturing and wholesaling trade to transportation and warehousing.
If Trump does enact the 25% across-the-board tariffs he’s threatened, companies in that 2,000-mile area will likely feel the economic impact first.
”I can’t imagine these communities avoiding a recession during a sharp increase in tariffs,” Christopher Erickson, economics professor at New Mexico State University, told CNN.
Tecma Group employs nearly 17,000 people across both sides of the US-Mexico border. In Ciudad Juarez, its factories make a variety of products from mannequins to electrical components. The company then transports those across the border, into El Paso and beyond. Free trade — with its reduced or even eliminated tariffs — is crucial to keep the business profitable.
But Tecma is now in an uncomfortable wait-and-see position, said CEO Alan Russell.
“If you’re sitting in a boardroom trying to make a decision and you don’t know what the costs are going to be, you’re going to put a hold on the decision. That’s what’s going on right now,” Russell said. “Uncertainty is the enemy of commerce.”
Russell said the uncertainty has put the company’s expansion plans on hold; he declined to share details of those plans.
At least 100,000 jobs in the Paso Del Norte area, which includes El Paso and Ciudad Juarez, could be at risk if the tariffs go into effect, especially in the auto industry, Jon Barela, chief executive of the Borderplex Alliance, an economic development group, told CNN, citing conversations he’s had with economists and analysts.
“Our region between Juarez and El Paso has a very complex and well-developed automotive supply chain,” Barela said. Car parts from companies like Bosch and Sumitomo Electric Wiring Systems often travel back and forth over the border as cars get assembled bit by bit.
“It’s easy to say, ‘boy, let’s create jobs in the United States,’ but 25% tariffs would kill jobs by bringing the automotive industry to its knees in many respects, since the tariffs would add to the cost of making a vehicle,” he said.
Mexico is the top US trading partner. The two countries, along with Canada, have shared free trade agreements for more than three decades. The North American Free Trade Agreement, which went into effect in 1994 and was replaced by a different free trade agreement in 2020, “appears to have been positive, though modest, primarily because trade with Canada and Mexico account for a small percentage of U.S. GDP,” according to a Congressional Research Service report.
“Merchandise imports from NAFTA partners increased from $151 billion in 1993 to $614 billion in 2017 (307%), while exports increased from $142 billion to $525 billion (271%).”
Mexico exported $467 billion worth of goods to the US last year through November, according to the latest Commerce Department data. That includes goods such as cars, vehicle parts, fresh produce, appliances and lumber.
Since NAFTA, tariffs have been terminated or reduced among the three countries. Trump’s tariffs would “essentially suspend” the current trade deal, the United States-Mexico-Canada Agreement, Kenneth Smith Ramos, Mexico’s former USMCA chief negotiator, told NPR in a January 26 interview. The USMCA is up for renewal in 2026, and Trump is expected to use that as leverage to get Mexico and Canada to make additional commitments.
Tariffs make it more expensive for businesses to bring in goods from abroad. Importers can either absorb those costs or pass them on to consumers, both of which can shrink profit margins and make it harder to operate. That can affect everything from hiring and expansion plans to other business investments.
Economists widely expect Mexico to slip into a recession if the Trump administration proceeds with slapping 25% tariffs on Mexican goods, considering the country sends more than 80% of its exports into the US.
But that’s not just a problem for Mexico — it is also bad for the US. Many Mexicans often cross into the US for work, shopping, tourism or to see family. If the Mexican economy is reeling, those dollars would likely dwindle.
“Lots of people cross the border every single day for work or whatnot, so if there’s a bit of a downturn in the Tijuana area, that’s going to be felt by friends, family and business partners on the San Diego side as well,” said Kyle Handley, economics professor at the University of California, San Diego.
Not only would less shopping weigh on stores and restaurants near ports of entry, but it could also bite into government tax receipts, according to Elizabeth Suarez, president of the McAllen Chamber of Commerce in South Texas.
“McAllen is ranked as one of the top 20 communities in Texas for sales tax collection. Last year we broke a record, collecting over $96 million in sales tax, and that’s all just retail related,” Suarez said.
Source: edition.cnn.com
