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Trump Set to Impose Escalating Tariffs Up to 25 Percent on Mexican Imports

Another day, another tariff–this time on all imports from Mexico beginning June 10, starting at 5 percent and climbing to 25 percent by Oct. 1.

President Trump said that the new tariffs retaliate against immigration issues at the southern border into the U.S., but the new duty also comes as Mexico has submitted the proposed U.S.-Mexico-Canada Agreement for ratification.

In a morning tweet on Friday, Trump said: “Mexico has taken advantage of the United States for decades. Because of the Dems, our Immigration Laws are BAD. Mexico makes a FORTUNE from the U.S., have for decades, they can easily fix this problem. Time for them to finally do what must be done!”

The current plan after initiation of the 5 percent tariff is for an increase to 10 percent on July 1, 15 percent on Aug. 1, 20 percent on Sept. 1 and 25 percent on Oct. 1. The schedule for the increases is essentially to exert pressure until the Mexican government puts together a plan to stop or curb the number of undocumented immigrants to want to enter the U.S

Hun Quach, vice president of international trade at the Retail Industry Leaders Association, was quick to issue a statement Friday morning denouncing the new tariffs.

“Threatening tariffs on Mexican imports while simultaneously seeking support in Congress for a trade deal aimed at keeping trade barriers low with Mexico is a confusing and counterproductive strategy,” Quach said, adding that it didn’t matter whether the “rhetorical target is Mexico or China, the bill is adding up for American consumers who will pay the price for these tariffs.”

Quach cited a data point from Tariffs Hurt the Heartland, which noted that “Americans have already paid over $25 billion in tariffs as of this month.” While the hike on existing tariffs on Chinese goods will be hard enough for consumers, the new tariffs planned on Mexican goods will exacerbate an already difficult financial situation for many American consumers.

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And Rick Helfenbein, president and chief executive officer of the American Apparel & Footwear Association, said, “Because of President Trump’s tax increase, Americans will pay more for everything from jeans to cars to computers to machinery…. The bottom line is that these tariffs are disastrous for the American economy.”

Helfenbein added that the planned Mexican tariffs are “unfathomable, especially as we are working to gain approval of the USMCA in the United States and as the USMCA is about to be introduced in the Mexican legislature. More than 200,000 jobs in our industry, and countless more across the United States, depend on strong linkages with Mexico. Whether imposed at 5 percent or 25 percent, these tariffs put American jobs in jeopardy.”

And Jay Timmons, president and CEO of the National Association of Manufacturers, said, “These proposed tariffs would have devastating consequences on manufacturers in America and on American consumers.” He said that manufacturers have been working hard to secure passage of the USMCA, and the last thing “we want to do is put that landmark deal–and the 2 million manufacturing jobs that depend on North American trade–in jeopardy.”

Timmons emphasized that while the broken immigration system and inaction have led to a “true humanitarian crisis,” the situation should be resolved through a comprehensive, legislative solution.

“We continue to urge the administration and Congress to work together to address this crisis because the problem will not be solved just by blaming other countries,” Timmons continued. “Intertwining difficult trade, tariff and immigration issues creates a Molotov cocktail of policy, and America’s manufacturing workers should not be forced to suffer because of the failure to fix our immigration system.”

Consumers will shortly begin to see higher costs on goods coming in from China. Earlier this month, the Trump administration hiked the tariff rate to 25 percent from 10 percent on $200 billion in Chinese imports. Those goods were expected to reach U.S. ports this week. The Chinese tariffs were due to a trade dispute between U.S. and China, particularly over protections connected with the transfer of intellectual property assets. China’s retaliation with its own tariff hike on $60 billion in American exports is not far behind.

And coming up next month is a public hearing in Washington, D.C., on a proposal to place a 25 percent tariff on $300 billion in Chinese imports not currently taxed, which includes apparel, footwear and some textiles. The new tariff, if it goes into effect, is projected to impact the back-to-school selling season.

According to Chris Krueger, Washington strategist at the Cowen Washington Research Group, “U.S. goods imports from Mexico totaled $346.5 billion in 2018, up 10.3 percent from 2017.”

The tariff situation is likely to have a far-reaching impact for American consumers and companies. Over the past two weeks, several American retailers and brands have reported earnings results, and many have talked about slower sales to the point where they’ve already lowered guidance for their current fiscal years. Early reads on the second quarter for most retailers have indicated a slow start.

Executives at retailers such as Walmart have indicated that the increased tariffs on Chinese imports alone would be passed along via higher costs to consumers, which means higher prices at checkout. And on Thursday, Dollar Tree executives said the chain would probably need to raise prices above $1. Of course, those projections and comments were before anyone knew of the new tariffs on Mexican goods.

On Friday morning, the stock markets were down as investors digested the news on possible tariffs on Mexican goods. Shares of Kontoor Brands Inc., the denim operation that was spun off by VF Corp. last week, saw its shares trade down 7.7 percent to $37.15 percent over tariff concerns. Many of its denim products are manufactured in Mexico.