An announcement that the Administration will impose a five percent tariff on all imports from Mexico commencing June 10th sent shockwaves through all segments of the U.S. economy. The action was taken in terms of the Initial Emergency Economic Powers Act. If imposed, the tariff would be increased progressively to a level of 25 percent on October 1st.
Announced in a Twitter communication on May 30th, the tariff is intended to force Mexico to curb illegal migration of refugees from Central America to the U.S. Previously the President threatened to close the southern border if Mexico is not more aggressive in curbing migration.
Obviously, the unilateral action by the Administration will imperil the USMCA, yet to be ratified by all three legislatures of the signatories.
Mexico is the third largest trading partner of the U.S. receiving $350 billion in goods annually.
Implications of even a five percent tariff are immense since the supply chains for the U.S. automotive and other industries are intertwined. Inevitably the Government of Mexico will react by imposing punitive tariffs on U.S. exports and it is expected that the agricultural sector, and specifically poultry, will be affected.
There is question as to whether the action by the Administration is legal and the decision to impose tariffs as leverage on our southern neighbor will be contested in the courts.