When Donald Trump announced a 25% tariff on all Mexican exports to the U.S. in early March, many feared severe economic consequences, including a drop in GDP, job losses, and harm to export-heavy sectors like automotive, electronics, and food. However, a crucial clarification soon followed: goods compliant with the T-MEC would be exempt. This adjustment shifted a crisis scenario into one of controlled pressure and unexpected opportunity.
The tariff on Mexican steel and aluminum remains in effect, increasing costs even for compliant products. For example, car prices could rise by 187 to 562 dollars per unit; TV prices by 1.2 to 2.5 cents per unit; and canned tuna prices by 2 to 3 cents per can. While these amounts seem small, they can erode margins and affect demand in sensitive sectors.
Trump’s new tariffs on European and Asian products (20-46%) place Mexico in a competitive advantage position. A Japanese car now costs 37,200 dollars instead of the initially feared 35,000; a German one, 36,000. A Chinese TV rises from 500 to 670 dollars; a Thai canned tuna from 5 to 7.30 dollars. Meanwhile, Mexican products maintain their base price.
This price difference generates real advantages that previously did not exist, especially in the U.S. market, which represents 73% of Mexico’s exports. Hence, economic impact will be less severe than initially feared. Instead of a potential GDP drop of up to 2.8%, estimates now range from 0.6 to 1.5 percent.
Moreover, strategic repositioning could add up to 21 billion dollars to the GDP and create between 30,000 and 60,000 jobs. Even a modest 5% increase in manufacturing exports would bring over 20 billion dollars annually.
Inflationary effects must also be considered. In Mexico, rising input costs are already pressuring durable goods prices. In the U.S., costlier key imports could raise inflation just as the Federal Reserve tries to curb it, affecting demand for Mexican products.
For ‘Plan México’, tariffs present both challenges and opportunities. Advantages over Asia and Europe could lead to more investment, formal employment, and tax revenue, providing crucial resources for the government’s priority projects.
Mexico’s relatively favorable outcome is largely due to President Claudia Sheinbaum‘s cool-headed approach, her team’s negotiation skills, and Trump’s public respect for her. His recognition of the T-MEC treaty he promoted limited damage.
What initially seemed like a devastating blow is now a concrete opportunity that Mexico should seize. The GDP drop will be much less severe than feared.
Eduardo J Ruiz-Healy
Facebook: Eduardo J Ruiz-Healy
Instagram: ruizhealy
Website: ruizhealytimes.com
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