Commentary:
President Trump called April 2, the day he unilaterally imposed import tariffs on most nations in the world, “Liberation Day.” Down here at the U.S.-Mexico border, I think calling April 2 “Chaos Day” would be more appropriate.
I have never seen so much confusion and scrambling in the trade community as I witnessed that day. So, let’s review what transpired and the layers of complicated-to-understand tariffs that have been unveiled.
On April 2, Trump imposed a 10% across-the-board import tariff on most countries of the world. On top of this, he imposed what he is terming “reciprocal tariffs” on countries he believes are unfairly imposing tariffs on U.S. products, creating trade barriers for U.S. exports or have a trade surplus with the U.S.
By Wednesday April 9, Trump had paused for 90 days the reciprocal tariffs — with the exception of China, which faced 145% tariffs as of Thursday.
Trump also imposed a 25% tariff on steel and aluminum imports. Then, he imposed a 25% tariff on foreign autos and auto components imported into the U.S.
Mexico and Canada were excluded from the 10% tariff, but a 25% tariff on imports from both nations was previously imposed in March and then suspended. Would the 25% tariff now come into effect? What about the millions of automobiles and auto components that Canada and Mexico export annually to the U.S.? Are they subject to tariffs? This is where the confusion and chaos set in because the Trump administration provided very few details on what was being applied and what was not.
In an attempt to understand the tariff situation, I called my contacts in the federal government who deal with issues such as tariffs and trade. They could not provide me with specific answers, as they were searching for answers themselves. Either White House officials neglected to brief them on how the new tariffs would work and how to respond to the public, or they were intentionally left in the dark; it remains a mystery.
I then called customs broker friends of mine, who have been in the business for decades. They too were scrambling to see how tariffs would be applied on goods being imported from Mexico and the rest of the world by their customers. Some were having emergency meetings and calling Customs and Border Protection, or CBP, for clarification. One customs broker friend of mine was on vacation on a tropical island, and ended up spending a great part of April 2 on calls and communications with his headquarters.
Finally, by the end of the day I was starting to receive clarification from the customs brokers. Imports from Mexico and Canada that comply with the terms of the U.S.-Mexico-Canada-Agreement, or USMCA, will be subject to a 0% tariff. Imports from these two countries that do not adhere to USMCA terms will be subject to a 25% tariff. The bulk of these nonadherent imports most likely do not have the requisite North American content in terms of raw material or labor prescribed by the USMCA. Other tariffs relate to non-USMCA compliant energy and minerals, on which a 10% tariff will be applied.
The tariffs issue can change day to day, and monitoring even newer tariffs by the Trump administration, and counter tariffs imposed on the U.S. by countries such as China and trade blocs such as the European Union, will be extremely difficult. CBP officials and private customs brokers will have their hands full understanding which tariffs apply and how they are applied. Electronic systems to process tariffs can take time to be modified, and time lags can occur. Mistakes can be made, and further clarification needs to be sought.
Even if there were doubts that Trump would impose tariffs on April 2, it should have come as no surprise that this could have happened. What was a surprise was the scope of the tariffs and how they were unveiled. Prior to April 2, the talk of tariffs caused businesses that do cross-border trade or importations to pause their planned expansions and new employee hirings. Before this date, it seemed like the U.S.-Mexico border region was stuck in neutral, waiting to see what would transpire.
On and after April 2, companies scrambled to find out which tariffs applied and how to apply them. Now, companies are trying hard to figure out how the tariffs are going to affect their markets and thus their future. It is this uncertainty that is the most difficult challenge.
Jerry Pacheco is President of the Border Industrial Association. Jerry Pacheco's opinions are his own and do not necessarily reflect the views of KRWG Public Media or NMSU.