Friday, May 31, 2019

Something to Know - 1 June

As you contemplate your breakfast and shopping plans, here is a WAPO story on what you might be interested in.

As Mexico becomes America's top source of imported goods, here are the products that could be most hit by Trump's tariffs

A beer display in Oklahoma in October contained several Mexican imports. (Sue Ogrocki/AP)
May 31 at 9:52 AM

Mexico is an integral part of the U.S. economy. It's the source of most of the United States' imported beer and tractors, to say nothing of the rest of the $346.5 billion in goods Mexico sent to the United States last year.

Those goods may soon be hit with a 5 percent tariff. President Trump said Thursday the tariffs will begin at 5 percent on June 10. They will rise an additional 5 percent each month until they hit 25 percent on Oct. 1. Those tariffs will remain elevated "until Mexico substantially stops the illegal inflow of aliens coming through its territory," the White House said.

President Trump on May 30 vowed to impose a 5 percent tariff on all goods coming from Mexico unless it stopped the flow of illegal immigration to the U.S. 

As tariffs ramp up, the price you pay for goods as varied as cars and cauliflower will probably rise. After all, companies tend to pass the costs of tariffs on to consumers, as National Economic Council Director Larry Kudlow acknowledged in May.

Beyond the ubiquitous avocados, what do we import from Mexico? To answer, we looked at imports of more than 1,230 categories of goods for the year ending in March — the most recent 12-month period for which we have data from the Commerce Department.

The top of the list is ruled by components for the American auto industry. Deutsche Bank Securities economist Torsten Slok told The Washington Post that two-thirds of U.S. imports from Mexico are intermediate parts that U.S. companies use to produce goods. Chief among them? Cars.

It doesn't stop there, of course. American companies increasingly look to Mexico for raw materials, such as gold, to technical parts, such as electrical transformers.

As the trade war with China intensifies, Mexico is vying to become our single-largest trading partner. And an update to the transformative North American Free Trade Agreement, which made Mexico the keystone of many American companies' production processes, may soon go to Congress for approval.

But it's not just sheer size that leaves American companies exposed. After all, if a company can simply switch to a supplier in a different country for little additional cost, there won't be much to pass on to the consumer.

To find hints as to which products are least likely to have low-cost alternatives, we should consider those products that come primarily from Mexico. If companies have chosen Mexico as their main supplier, we can assume it's because the alternatives would be more expensive.

These Mexico-dependent categories include fresh produce, such as tomatoes, cauliflower and lettuce, as well as heavier equipment, such as tractors and trucks. There is also beer. Mexican brands such as Corona and Modelo Especial are among the best-selling beers in the country.

It's not just American tariffs that could send prices higher. There are two sides to this trade relationship, and many American industries, such as agriculture, rely on Mexican buyers. There are about 126 million of them — Mexicans outnumber Canadians 3.5 to 1.

Mexico's retaliation against Trump's earlier steel and aluminum tariffs had cost hog farmers about $12 per animal, Minnesota hog farmer Randy Spronk told The Post's Laura Reiley recently.

"We've been hit more than any other sector," Spronk told Reiley. "Our highest value markets are the ones that are impacted by these tariffs. We got side swiped. The additive effects of these tariffs come out of my back pocket."


Fascism is capitalism plus murder.
 - Upton Sinclair 


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