Since tariffs are still on the front burner of the financial news cycle, I thought I’d share some interesting facts about our trade relationship with Mexico.
- The US imported $345 billion in goods from Mexico last year and we exported $265 billion of our stuff to them. This was surprising to me because I thought the trade imbalance was much greater, meaning we imported much more than we exported to them.
- If Trump goes through with the 25% tariffs on Mexican imports, it would cost the importers (US companies) about $88 billion annually. These companies will have to eat these costs and/or pass them on to us, the American consumer.
- About 30% of the materials of a finished product that we import from Mexico comes from the U.S. This tells you how intertwined the international trade is in North America.
- The most interesting fact that I learned was that two-thirds of our imports from Mexico are taking place as intra-company imports. This means that these products travel across our southern border between factories owned by the same company. These companies’ products will get hit with a tariff each time they cross the border as they go from one plant to the next. And if Mexico retaliates with their own tariffs, many of these companies may not survive.
I am not a big fan of tariffs. In a global economy, it is an outdated negotiating tactic that produces an adversarial trade relationship where nobody wins. Also, using tariffs to stop illegal border crossings just won’t work. We definitely need a more secure southern border but tariffs are not going to solve that problem.
Joe Baker, CFP®
Baker Asset Management, LLC
joebaker@bakerassetmanagement.com
