President-elect Donald Trump doubled down on plans to impose sweeping new tariffs on some of the country’s biggest trading partners, and his remarks reverberated in Arizona, where trade with the United States’ southern neighbor is a linchpin of the state’s economy.
In social media posts on Monday, Nov. 25, Trump pledged to impose a 25% tariff on goods imported from Canada and Mexico and an additional 10% tariff on imports from China, on his first day in office.
“It’s time for them to pay a very big price,” Trump wrote.
Cross-border exchange is central to Arizona’s supply chains and is estimated to support at least tens of thousands of jobs in Arizona.
Tariffs would impose costs on Arizona importers which, business owners told The Republic, they would pass along to consumers.
“It’s going to have a huge impact over here, and the industry is not going to be able to handle it,” said Miguel A. Suarez, the president of MAS Melons and Grapes, in an interview with The Republic on the effects of the proposed tariffs on the U.S. “It’s going to be catastrophic for the United States, not only Nogales.”
Whether Trump would follow through with the tariff plan is an open question. Some business leaders cautioned against reading the move too literally, noting Trump made similar comments during his first term that didn’t end up coming to pass.
Jaime Chamberlain, a produce distributor based in Nogales, said he was not taking any steps to prepare his business for tariffs.
“It’s negotiation strategy 101,” said Chamberlain, who also sits on the board of the Arizona-Mexico Commission. “I have a tremendous faith that we won’t get to that point.”
Tariff plan scares some Arizona importers
Arizona and Mexico’s economies are tightly linked.
Mexico was Arizona’s top source of imports in 2023, according to data on Arizona-Mexico Economic Indicators compiled by the University of Arizona. One-third of its imports, or $11 billion came from Mexico, much of it in the form of produce — like tomatoes, peppers, and grapes — and aircraft and auto parts.
Likewise, the state sends billions worth of exports back to Mexico every year.
“The relationship with Mexico is, arguably, the most important one that we have,” said Chris Camacho, president and CEO of the Greater Phoenix Economic Council.
Arizona’s relationship with Mexico has helped bring economic heavyweights to Arizona, particularly in the auto and defense manufacturing sectors, which often send parts back and forth across the border throughout the assembly process.
Electric vehicle company Lucid Motors and industrial conglomerate Honeywell rely on the state’s integrated supply chain with Mexico, Camacho said.
Nowhere in Arizona is the tri-national trade agreement between the U.S., Mexico and Canada more evident than in Nogales, Arizona. Billions worth of goods are imported daily from Mexico through the ports of entry, with fresh produce the largest share.
“Right now, the cost of production, any item, is very high. The seed, the fertilizers, the packing materials, the freight – everything is really high,” Suarez said. “A 25% duty is going to end the industry.”
He said growers in Mexico are already contending with slim profit margins, leading to reduced quantities of produce.
MAS Melons and Grapes imports about 10 to 20 loads of melons daily — about 40,000 pounds — Suarez said. Bringing a 20-pound box of melons from northern Mexico to the U.S. costs a grower up to $5.50, he said.
“When you go to a store here in Arizona, a honeydew melon is about $4.50,” he said. “We’re going to need 25% more.” Suarez said the additional cost could be passed on to consumers.
SunFed is also an agriculture importer in Nogales, and its operations are right next door to MAS Melons and Grapes. SunFed employs nearly 70 people and has been in business for 30 years in southern Arizona. Matt Mandel, vice president of finance and legal at SunFed, is the third generation in his family to work in this business.
Mandel said the costs would be determined by grocers or other retailers that would be selling the imported goods. “Whether they decide to pass on the additional costs immediately (or) they price average their costs up going forward, that’s somewhat out of our hands. We have to pass on the additional costs on day one, because we have to be paying that out on day one.”
“There’s no way that (if) these tariffs come to pass that (it) does not result in higher prices for consumers, period, full stop,” he said.
Mandel has been talking with people in the industry on both sides of the border and described a lot of fear over what may come.
“They’re terrified because it builds a sense of uncertainty into an entire industry — an industry that is billions of dollars,” he said. “Regardless of whether it’s a U.S. employee or a Mexican grower, nobody is in favor of this because it will negatively affect our industry.”
Suarez echoed this feeling, painting a picture of food scarcity. “There will be a lot less food in the United States in the winter. The United States depends on Mexico to have food in the winter months,” he said.
Mandel also warned about retaliatory tariffs that could be imposed by the Mexican government on American exports. Mexican tariffs would affect the agriculture business because growers in Mexico rely on American pesticides, fertilizers, seeds and agrochemicals.
“Every single one of those inputs is going to go up. You’re going to have a 25% tariff on whatever the cost of the good is upon importation,” he said. “But as all of those additional costs go up, you can guarantee that every single item is going to go up by more than 25%.”
Mandel believes tariffs would devastate the American economy, adding to the inflationary problems people have faced in recent years.
“I don’t think a lot of the people that elected Trump knew what they were signing up for,” he said. “I don’t think anybody would have said, ‘Yeah, I want my groceries to go up by more than 25%.’”
What is a tariff? Would Trump follow through?
Tariffs, or added surcharges on imported goods, have long been a hallmark of Trump’s presidential campaigns. He has consistently promoted heavy tariffs as a negotiating tactic to curb illegal immigration through the southern border, a major campaign priority.
The president-elect’s transition team did not immediately return a request for comment.
Trump also campaigned on pledges to lower inflation and jump-start the economy. Tariffs are meant to increase the demand for domestic goods, but the taxes can also raise prices and reduce goods and services available to American businesses and consumers, according to the nonpartisan Tax Foundation.
The president-elect’s penchant for tariffs could be complicated by a tug-of-war between Trump and some of the Republican Party’s biggest stakeholders and his top advisers. Trump named Howard Lutnick, the billionaire CEO of investment bank Cantor Fitzgerald, to lead his tariff and trade strategy.
Even before Election Day, Lutnick tempered Trump’s sweeping tariff proposal in a televised interview, saying that Trump made “broad statements” on the campaign trail so people would understand him and would be more strategic in the White House.
“I think we should put tariffs on stuff we make and not put tariffs on stuff we don’t make. It’s pretty simple, and of course it’s a bargaining chip,” Lutnick said during a TV interview in September that was promoted by the Trump campaign. “This is just negotiating.”
During his first term, Trump imposed tariffs on billions of dollars of Chinese-made goods. The U.S. eventually signed a trade deal with China that was later scuttled by the pandemic. President Joe Biden kept some of Trump’s tariffs on China in place and increased them in targeted areas, such as electric vehicles.
Chamberlain, the Nogales-based produce distributor, shrugged off chatter about steep tariffs.
He said Trump’s demands were “not unreasonable.” He has other considerations, too: Chamberlain worries about the safety of his 18-year-old son and said he would willingly pay a 25% tariff if it would help lower the number of deaths from fentanyl.
If Trump implements the tariffs, he said, “Is it going to be extremely expensive? Absolutely … But I’m also going to pass that cost on to the consumer.”
Camacho, with the Greater Phoenix Economic Council, said the business community is generally taking a “wait and see” approach to Trump’s latest announcement.
“The president-elect is sending a very direct message to Mexico … about fentanyl, about caravans,” Camacho said. “This is one way to get the leadership in Mexico’s attention.”
Who pays tariffs? Trump strategy risks costly tit-for-tat
News of the proposed heavy tariffs on imports from Mexico made its way to Mexico City, where President Claudia Sheinbaum signaled during a news conference on Tuesday, Nov. 26, that her government would respond with its own tariffs.
“The response to one tariff will be another, until we put at risk companies that we share — yes, that we share,” referring to automotive companies with plants in Mexico. Shienbaum read aloud a letter directed at Trump, in which she warned that tariffs would increase inflation and cause economic pain in both countries.
Shienbaum said she would be open to discussion about the issues Trump raised in his Truth Social post but made clear that the issue of drugs was an American problem.
The Mexican president also responded to Trump’s rhetoric about immigration, noting efforts Mexico has made to stem the flow of migrants. Shienbaum pointed out that “caravans of migrants no longer reach the border.”
But, she added, weapons continue to make their way through the U.S. southern border and into the hands of criminal organizations.
“We do not produce weapons, we do not consume synthetic drugs. Unfortunately what we do have is the people who are being killed by the crime that is responding to the demand in your country,” she said.
The Mexican president said she would attempt to reach Trump via phone and send a letter to Canadian Prime Minister Justin Trudeau.
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Publish date : 2024-11-27 01:50:00
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