There’s nothing like moving into a new house and giving the neighbors a hard time the moment you walk through the door. That’s what Trump, who announced that upon taking office on January 20, would impose 25% tariffs on all products from Mexico and Canada. Until when? Until the two neighboring countries managed to “prevent the invasion of drugs and illegal immigrants” from reaching the United States. Almost nothing.
“It’s time they pay a very high price!” »wrote the new president, even if, in all likelihood, those who will pay the most will be the Americans themselves. Let’s take a practical and somewhat stereotypical case: a supermarket in the United States that asks a Mexican company to send it a truck full of avocados.
If Trump complies with what he said, during customs clearance the supermarket will have to pay the US government 25% of the value of the avocados. Since I haven’t paid for it before, the supermarket has to make a decision: should I sell the avocados 25% more to cover the cost? Do I deduct it from my performance? Should I tell the Mexican company that they have to sell them to me for 25% less?
Trump, like a good capitalist, is convinced that the American supermarket will not give up its profits and believes, for the same economic reasons, that he will not want to hit his customers in this way because he would sell far fewer avocados. So he loves the two remaining options: The supermarket will have to ditch Mexican avocados and sell patriotic American avocados that pay no tariffs, or Mexican farmers will get upset and drop their prices by 25 percent. The problem is that it doesn’t work that way.
The first option doesn’t have much of a future: Americans ate about 1.2 billion pounds of avocados in 2021, according to their own government data, and U.S. agriculture has never produced more than 180 million per year (15%) and that was a long time ago. time. Currently, the country buys 90% of the avocados it consumes abroad and almost 90% comes from Mexico. It is therefore unrealistic to think that this volume of production can be replaced overnight: if you want your lawyer, you have to pay more.
Another option, of course, is to not eat avocado, but let’s keep in mind that 60% of the fresh fruits and 40% of the vegetables Americans eat come from abroad. Among these imports, more than half of the fruits and 90% of the vegetables come from Mexico or Canada: do you like to put tomatoes on your hamburger all year round? 85% of greenhouse tomatoes come from Mexico.
But let’s not just talk about food: if Mexico sells nearly 8.5 billion euros of fruits and vegetables to the United States, it sells 12 times more cars and automobile parts; The United States buys eight million barrels of oil every day from other countries, more than half of them from Canada. Is all this irreplaceable? No, but it’s not easily replaceable. Would this harm Mexico and Canada? Of course, but also in the United States.
For starters, Americans will pay higher prices and/or have to change their habits because of these 25% tariffs, but these types of measures also cut both ways. Mexico and Canada are not only big sellers hoping to sell their products to the United States, they are also the two largest markets for purchasing American products. It is predictable that their governments will respond by imposing tariffs on these products: the Mexican government has already announced this and has done so very effectively in the past in other trade disputes.
Finally, we must question the effectiveness of this tariff. Beyond the anger or not of his two neighbors, the theoretical objective that Trump has set for himself is to reduce irregular immigration and drug trafficking across borders. Is it realistic to think that a weaker Mexican economy favors these goals?
With the improvement of living conditions in Mexico, between 2007 and 2022 the number of undocumented Mexicans in the United States decreased from almost 7 million to 4, both for those who returned to Mexico and for those who decided not to undertake the journey. Regarding drugs, will a serious economic crisis make the Mexican state more effective against drug trafficking? Will the demand for opioids in the United States decrease if the economic situation deteriorates?
The other options, which are not completely ruled out, are that Trump set these impossible goals because he is protectionist and just looking for an excuse to impose tariffs. Or because he would be happy for the Sheinbaum and Trudeau governments to lick him a little, but he does not expect substantial changes. Or because he didn’t think through the consequences carefully, which wouldn’t be the first time either.
Or maybe even because what he announced is nothing else, an announcement. A publication on a social network. On January 20, we might find an executive order, or we might not, and that order might say what the message says, something a little different, or something completely different. Trump is back and this uncertainty is also part of the return.
