President Trump has stated that he will impose a 5% tariff on all goods from Mexico on June 10 if Mexico does not take action to slow the volume of immigrants at the US border. The Perryman Group, an economic analysis firm based in Texas, analyzed the economic implications of such a tariff and found that it would likely cost hundreds of thousands of US jobs if enacted and maintained.
The current slowdown at the US-Mexico border is causing substantial economic harms. Trade volume has grown substantially, more than doubling over the past 20 years and up 55% between 2010 and 2018. During 2018, total trade volume between the United States and Mexico exceeded $611.5 billion, with $265.0 billion in US exports to Mexico and $346.5 billion in imports from Mexico. In fact, recent data for January and February of 2019 reveals that, for the first time, Mexico is the top US trading partner.
The Perryman Group's Bordernomics study analyzes the economy of the US-Mexico border region in order to improve understanding of regional dynamics and identify actions which could generate meaningful improvement. The full study provides background information and a summary of current economic conditions, addresses the importance of NAFTA, describes challenges and opportunities faced in the border region, and estimates the business activity and jobs which could be added with enhanced cooperation among the US-Mexico border states.
Every day, thousands of trucks cross the Texas-Mexico border, bringing a variety of goods ranging from fruits and vegetables to electronic equipment. Cross-border supply chains are common, and manufacturing facilities on both sides of the border depend on the efficient flow of products across the border. The recent slowdowns due to additional inspections disrupted these patterns, resulting in not only spoilage of perishable items, but also production delays. Given the strained capacity at the border in normal times, it will be difficult and, in many instances, impossible to “catch up.”
Dr. Perryman breaks down the losses from the slowdowns associated with the increased inspections at the border.
Mexico is suffering heavy economic losses this year. Dr. Perryman explains how this also affects Texas.
Almost a year after the three countries signed the new US-Mexico-Canada trade deal, there's an agreement to make it the new NAFTA. Dr. Perryman says a big winner is Texas.
A strong trade agreement with Mexico and Canada is clearly a "win" for the US economy. While the US-Mexico-Canada Agreement (USMCA) must still pass the US Senate and be ratified in its revised form by Mexico (which has some concerns) and Canada, it appears that a structure has been essentially finalized to replace the 25-year old North American Free Trade Agreement (NAFTA). The original pact redefined the economies of the entire continent, and the next generation will allow the momentum to continue.
President Trump has threatened to impose 5% tariffs on all goods from Mexico on June 10 if Mexico does not take action to slow the number of immigrants at the border. As I am writing, he has vowed to continue to escalate the levies to 25%, Mexico has threatened to retaliate, and Congress has announced that it will stop them with enough votes to override a veto. Who knows what the status will be when you are reading this? Even if the situation is resolved, the threat of such action increases uncertainty and makes it more difficult to finalize a replacement for the North American Free Trade Agreement. If the tariffs actually go into effect and are maintained, it would cost hundreds of thousands of US jobs.
Every day, nearly $1.7 billion in products cross the US-Mexico border. Trade volume has grown substantially, more than doubling over the past 20 years and up 55% between 2010 and 2018. In early 2019, in the midst of the ongoing trade war with China, Mexico emerged as the largest trading partner of the US. Millions of trucks cross the border each year, and delays at the border cause logistical problems. The current slowing on the US-Mexico border is reducing efficiency and could cost the US economy billions in output and hundreds of thousands of jobs if it persists.