WASHINGTON — President Donald Trump's surprise threat to impose escalating tariffs on Mexican imports jolted industry leaders throughout the U.S. economy Friday, sparked opposition even from usual Trump allies and set the stage for American consumers to face higher prices.
Trump vowed Thursday to slap a 5% tariff on all Mexican imports on June 10, just over a week away, and raise those tariffs to 25% by October, unless Mexico stops the flow of Central American migrants into the U.S.
If the tariffs were to take effect, they could eventually raise prices for a new Chevrolet Blazer SUV, a burrito at Chipotle, grapes at the grocery store or a new shirt. A 5% duty on the $346.5 billion of goods imported from Mexico translates into $17 billion in tariffs. Some of that higher cost might be paid, at least initially, by U.S. companies, but a significant portion is likely to be passed onto U.S. shoppers.
The impact of Trump's latest tariffs, should they be imposed, will fall first on U.S. companies. Businesses in many industries have set up tightly linked supply chains with Mexico. Billions of dollars of auto parts, for example, are sent back and forth across the U.S.-Mexico border, in some cases several times, as components are added and integrated into finished cars. Similar networks exist in other industries, from clothing to electronics. The import taxes could quickly translate into much higher costs.
Peter Navarro, a top trade adviser to the Trump White House, insisted in an interview on CNBC that the Mexican government and businesses would pay the tariffs. But about 40% of imports from Mexico are from U.S.-affiliated companies, meaning there is no Mexican company that would pay. Instead the tariffs will simply raise costs for U.S. companies - and ultimately for consumers - particularly for parts that cross the border several times, Mitchell said.
The U.S. economy has been integrating with Mexico's since the implementation of NAFTA in 1995. All U.S.-made cars now include at least some parts from overseas, and 37% of those parts are from Mexico.