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Boston Globe
12-04-2025
- Business
- Boston Globe
Trump tariffs are a rude awakening for border cities that bet on trade
Since the North American Free Trade Agreement, or NAFTA, took effect in 1994, the region has grown into a $250 billion economic machine. Get Starting Point A guide through the most important stories of the morning, delivered Monday through Friday. Enter Email Sign Up 'It's a third country,' Rafael Fernández de Castro, head of the Center for US-Mexican Studies at the University of California at San Diego, said of the binational entity that has arisen, combining cultures and economies. Advertisement Mexican officials are cautiously optimistic that the region will survive the onslaught of US tariffs, in part because many products are shielded by the free trade agreement. But jobs could disappear in both countries if tariffs disrupt a system of co-production that has sent car parts, airplane components and medical equipment zipping back and forth over the border. The uncertainty of the on-again, off-again tariffs has prompted many companies to pause investments. Confusion reigns over which products will qualify for the free-trade exemption, with the vital car-manufacturing industry widely expected to take a hit. And Trump may not be finished layering tariffs on Mexico. On Thursday, he threatened more, because of what he called the country's failure to observe an 81-year-old water-sharing treaty. Advertisement 'We've lived 30 years under a nontariff, free-trade environment,' said Ernesto J. Bravo, a senior manager at Tecma, a firm providing logistical, customs and administrative services to export-oriented firms along the border. 'All that is now changing dramatically.' Trump imposed the tariffs in part to shore up US industry and drive more manufacturing jobs to the United States. It could take months for the effects to become clear - and some might not be what the US leader expected. Kenia Zamarripa, a vice president at the San Diego Regional Chamber of Commerce, worries that the measures could push up the price of steel, lumber and medical instruments - making it harder to build or run hospitals in California. 'Those things we have been promised as reasons to invest in the region are now at risk,' Zamarripa said. Ernesto J. Bravo, a top executive at Tecma, in his warehouse in San Diego on Wednesday. His firm helps exporting businesses with logistics and customs. He says Trump's tariffs have whipsawed the border region. Mary Beth Sheridan/TWP The moment tariffs became real Border residents have survived bouts of economic turbulence. In 2017, after Trump was first inaugurated, he insisted on a renegotiation of NAFTA, calling it 'the worst trade deal ever made.' The free-trade accord was largely preserved in its replacement: the US-Mexico-Canada trade agreement, USMCA. Two years later, Trump warned he'd impose crushing tariffs unless Mexico cracked down on US-bound migrants. It complied, and he dropped the threats. Then came the covid-19 pandemic. But those were nothing compared with this time. Normally, Bravo's firm sends 400 to 800 truckloads of goods across the border each week - everything from furniture to TVs to water-treatment equipment. But recently, the free-trade system screeched to a halt. Advertisement Trump had pledged to slap 25 percent tariffs on all goods from Mexico in February unless it reduced the flow of fentanyl and migrants to the United States. Mexican President Claudia Sheinbaum persuaded him to hold off for a month, while she rushed troops to the border. In early March, she won another month-long reprieve - but a few days passed before it kicked in. In the meantime, a 25 percent tariff descended on Mexican exports. 'It was a major impact and a major wake-up call to the industry that, 'Hey - this is very real,'' said Bravo. He sent only about a dozen trucks over the border in that period. Since then, Trump has narrowed the 25 percent tariff. He says it won't apply to products that qualify for duty-free treatment under the USMCA. The trouble is that's only around half of Mexico's exports. Even for eligible goods, many companies did not go through the trouble of shipping under USMCA, with its paperwork and requirements for quantities of North American components, opting instead to ship under low- or zero-tariff rules set by the World Trade Organization. Now, they're scrambling. It's one thing to switch a basic item, like avocados, from one set of rules to the other. But a car might have 10,000 unique parts, each with its own customs code, Bravo said. Manufacturers of electrical, communications and auto goods are being forced to investigate the origin of each part, even those purchased in Mexico. They're hunting for substitutes in North America for components made in China to be able to export duty-free. Advertisement The medical-instruments industry, a major manufacturer in the Tijuana area, is already warning of price hikes for critical items such as pacemakers and insulin pumps. Mexico could grab market share from China Despite the new obstacles, some Mexican politicians say the country may benefit from the tariffs - because China is facing even higher ones. Adriana Eguía is vice president of Vesta, an industrial real estate firm. She's typical of the bilingual, bicultural managers in the export industry. She grew up on the Mexican side of the border, married an American and lives in San Diego. She works from a stylish penthouse office with a sweeping view of Tijuana. In February and March, she saw little business, as Trump imposed trade measures that affected Mexico: the tariffs over fentanyl and migration, a 25 percent global tariff on steel and aluminum, and a similar tax on auto imports. (Vehicles from North America will be taxed only on the non-US parts.) Adriana Eguía, vice president of a Mexican industrial real estate firm, in her office overlooking Tijuana on Wednesday. She says she's hopeful Trump's tariffs will eventually help Mexico, since they're less than those imposed on China. Mary Beth Sheridan/TWP Then came his tariffs on China - which jumped from 54 percent to 104 percent, then 145 percent. 'The last three days have been crazy,' Eguía said. More than a half-dozen clients suddenly appeared at her office, trying to secure industrial properties. Most represented Chinese firms, she said, presumably looking to manufacture under the terms of the free-trade treaty. Three miles away, in an aging, gritty factory tucked into a modest Tijuana neighborhood, René Romandía is dreaming big. He's run a variety of manufacturing businesses over the years - making bodyboards, face masks during the pandemic, packaging materials. It's been a struggle; the Chinese government subsidizes many industries, which export a flood of cheap goods. 'This moment is completely different,' Romandía said. 'Because now we can compete on price against China.' Advertisement His phone rang. Trump had just hiked tariffs - again. 'Fifty percent more on China! Okay, papi,' Romandía said and put the phone down. He grinned. 'It's like, when the two giants are fighting and you are just watching them fight,' he said. 'We are getting benefits.' Still, it's unclear how much Mexico could benefit from the tariffs. One big unknown: whether the Trump administration will subject components to potential tariffs every time they cross the border. That could be ruinous for industries like autos and medical instruments. Mexico is trying to negotiate an exemption for such co-production. Sheinbaum's government has said it wants to seize this moment to develop more Mexican-made parts, to supplant imports from China and elsewhere. But the government is burdened by a 6 percent fiscal deficit, the highest in decades, and businesses have said they're wary of investing after Sheinbaum introduced a judicial reform that many say will politicize the justice system. Ultimately, many people in the border region say the close US-Mexico trade relationship is likely to endure, since it benefits Americans, too - helping US firms stay competitive globally, and providing consumers with lower prices. This week more than 100 officials and business leaders from San Diego and Tijuana traveled to Washington to lobby - as one region. 'We're super far away from both capitals, and things are done differently here,' said Eguía. 'We have this hybrid culture.' Ernesto Eslava in Tijuana and Valentina Muñoz Castillo in Mexico City contributed to this report.
New York Times
06-02-2025
- Business
- New York Times
Tariffs and Tightening Controls Threaten a Way of Life on the Border
The banks of the Rio Grande bristle with concertina wire. At intervals, Texas National Guardsmen and other troops sent by President Trump stand guard over the border. And several times a week, the sheriff of Maverick County, Texas, drives back and forth over an international bridge — to do his dry cleaning. 'I get my hair cut in Mexico too,' the sheriff, Tom Schmerber, said during a recent trip as he hauled a garbage bag filled with his dirty uniforms. Those chores are the kinds of routine, international economic transactions that people on the border have long taken for granted — and that people far from the border, especially those making policy in Washington, D.C., rarely consider. And they are threatened by tightening controls that are already hampering crossings for many would-be consumers, investors and business interests in Mexico and the United States. Formerly bustling downtowns near border crossings have been transformed by successive clampdowns. Fewer shoppers mean many vacant storefronts. And now, President Trump has injected still more uncertainty into border communities. Rounds of deportations, military deployments and especially the looming worry of punishing tariffs on Mexican goods threaten to upend the economic life of already fragile border cities. 'What is not good is this uncertainty,' said Jerry Pacheco, president of the Border Industrial Association, a trade group based in Santa Teresa, N.M., near El Paso. 'The border is a harbinger of what is going to happen to the rest of the economy.' For generations, it was commonplace for residents along the border to essentially live as if their bisected cities were one continuous community. But waves of mass migration and subsequent crackdowns have made such trips less a part of daily life. In recent months, starting with limits imposed by the Biden administration and continuing under Mr. Trump, casual crossings have become impractical if not impossible, particularly for shoppers from Mexico with temporary visas who now often wait in long lines to enter the United States. 'They stopped coming,' Gracie Benavides, 58, said as she hung blouses at a clothing store in downtown Eagle Pass that had been popular with Mexican shoppers. 'This used to be a great store.' She was apprehensive about what will come next. 'We're just waiting on what's going to happen,' she said. The threat of 25 percent across-the-board tariffs has not helped. When the tariffs were announced on Feb. 1, some companies rushed to bring products from Mexico into the United States. 'Everybody wants to import everything — we're trying to keep up,' said Miriam Kotkowski, the head of transportation services for Tecma, which helps companies manufacture products just over the border in Mexico. Then just as quickly as he announced these tariffs, Mr. Trump withdrew them. Still, the uncertainty remains. Mr. Trump postponed the tariffs on Mexico and Canada for just a month, and it's anybody's guess what concessions he will demand from those countries next. On the one hand, Tecma's president, Alan Russell, remained optimistic because he felt the proposed tariffs would be so blunt and destructive they could never happen. 'It's completely impractical,' he said, sitting in his El Paso offices. At the same time, Mr. Russell added, 'It's difficult to make plans.' International trade helps support border cities, through things like fees on crossings and on truck inspections, or by creating jobs in trucking and at warehouses, or by drawing customers from both sides of the international divide. In Roma, Texas, a small city in the Rio Grande Valley, leaders had hoped to attract jobs by creating an industrial park near the border. Construction has begun for the first business, but the future of the industrial park is now less certain, said the city manager, Alejandro Barrera. 'I don't know if there's going to be less trucks crossing over because of the tariffs,' he said. 'We have good relationships with our counterparts in Mexico,' he added. 'I think at the end of the day things will work out.' In Laredo, the nation's busiest land port, the highways remain jammed with trucks heading to and from Mexico. In Downtown Laredo, however, storefronts are shuttered, and buildings are abandoned. While local business owners expressed relief that Mr. Trump had postponed his proposed tariffs on Mexico and Canada, many were still bracing for a 10 percent tariff on products from China. 'It's hard not to feel deflated,' said Espiridion Razo Padilla, who owns a shoe store. 'We are here now. But for how long? We don't know.' Even before the possibility of tariffs, he was feeling the pinch, he said. About half of the store's customers come from Mexico. When business was good, daily sales might reach $700. On a recent day, he didn't ring the cash register before 1 p.m. and made just about $100. 'People are already feeling nervous,' Mr. Padilla said. 'They know that more tariffs or taxes, which is what they really are, is going to mean higher prices.' But Mr. Padilla, 60, felt powerless. 'We barely have enough to eat,' he said. 'What are we going to eat if things get worse? Eat seeds?' He declined to say who he voted for in the last presidential election. Not every business owner was so worried. 'I want the wall, and I want Trump to go crazy with the tariffs,' said Luvi Samtani, 58, who runs Asian Paradise Inc., a watch and jewelry store steps away from an international bridge. He hoped that steep tariffs would reduce the constant rumble of trucks from Mexico that clog the city's streets. As for his business, Mr. Samtani said he got his inventory from Switzerland and Japan, so he was not concerned. Many Texans on the border still cross for entertainment, restaurants or more affordable medical care. Others have grown wary of making the trip because of concerns about the potential danger, the occasional reports of violence and the risk of long wait times coming back into the United States. 'It's been 20 years since I've been over to Mexico,' said Ricardo Chavarria, a deputy constable who works in Maverick County. 'This is the closest I've been,' he said, standing near the banks of the Rio Grande on a recent afternoon. By contrast, Sheriff Schmerber said he went to the Mexican city of Piedras Negras, across the border from Eagle Pass, three or four times a week. He travels in his own Chevy pickup and leaves his gun behind because he can't bring it into Mexico. On a recent trip, he navigated the truck over one of the two international bridges, pointing out sites in Piedras Negras: the city hall, a central park, a favorite cigar-and-whiskey bar that he likes for its Cuban cigars. 'I don't feel in danger,' he said. 'I bring my wife sometimes.' In less than 15 minutes, he arrived at a small shopping center with an outpost of Ito's, a chain of Mexican dry cleaners that he learned about from a friend who lives nearby. The sheriff, who speaks fluent Spanish, greeted Ricardo Rangel, the manager of the shop, who proceeded to count out the clothes, including his sheriff uniforms. 'Seven shirts. Four pants,' he said in Spanish. 'Tomorrow afternoon is good?' 'Sí,' the sheriff replied. The sheriff, an elected Democrat, started taking his clothes over the border after growing frustrated with how long it took the dry cleaner in Eagle Pass to return his clothes. 'They take seven days to do my uniform,' he said. After dropping off his laundry, Mr. Schmerber went for lunch. He said he tried not to worry too much about politics now, even if the next few years would be spent under a federal government intent on clamping down on border crossings. 'Life continues,' he said.
Boston Globe
06-02-2025
- Automotive
- Boston Globe
Mexican border cities are in limbo as tariff threats spark fears of a recession
Advertisement Tariffs would cripple Mexican border economies that are reliant on factories churning out products for the U.S. — auto parts, medical supplies, computer components, myriad electronics — and likely thrust the country into a recession, economic forecasters have warned. Some workers wonder how much longer they'll have jobs, while business leaders say the uncertainty has already led many investors to start tightening their purse strings. 'It's a conflict between governments and we're the ones most affected,' said 58-year-old truck driver Carlos Ponce, leaning against his rig at the customs border crossing between Ciudad Juárez and El Paso, Texas. 'Tomorrow, who knows what will happen?' Ponce, who was driving a truck full of car shock absorbers, said he's spent the past 35 years moving goods across the border, just as his father did before him. Now, he's unsure how much longer that will last. Manufacturing in export-oriented assembly plants known as maquiladoras are the heart of Ciudad Juárez's economy, with 97% of its goods going to the U.S., according to figures from Mexico's Economic Ministry. The factories were born in the 1960s in an attempt to boost economic development in northern Mexico and lower prices for U.S. consumers. The maquiladora program later took off after the North American Free Trade Agreement, or NAFTA, was signed in 1994. The agreement was supplanted by a similar pact, the United States-Mexico-Canada Agreement, or USMCA, negotiated between the three countries during Trump's first term. Advertisement Today, neon signs with the dollar-to-peso exchange rate flash across the city, a reminder of the close ties binding both sides of the border. 'Everything that happens in the United States: its economic, social policy … directly affects us because companies here in Mexico depend on what they sell in the United States,' said Thor Salayandia, head of his family's auto-parts manufacturing facility in Ciudad Juárez. 'The United States also needs Mexico to keep manufacturing, but they're not seeing things like that.' This week, workers and business leaders alike breathed a sigh of relief when Mexican President Claudia Sheinbaum announced she had negotiated with Trump to delay tariffs one month. 'Now, we're buying time,' Salayandia said. Workers here assemble everything from auto parts to computer panels to T-shirts emblazoned with the American flag, logos of popular U.S. football teams and slogans such as 'Proud to be a federal employee.' Parts can cross the border multiple times before the final product is sold to U.S. consumers. That economic interdependence has left many in the city struggling to imagine a future without it. One U.S. company said it would likely have to move part of its manufacturing in the city to the U.S., but at a sharp cost. Antonio Ruiz, a compliance officer at Tecma, a U.S. firm that helps foreign companies set up shop along the border, said his was among a number of businesses to call emergency meetings over the weekend as economic forecasters warned that the tariffs could drive Mexico into a recession. 'It's very difficult to be prepared for something that has never happened before,' Ruiz said. 'As much as you want to prepare for it, the best you can do is prepare to brace yourself in the short term.' Advertisement Salayandia and economists warn that any sort of tax could lead to cascading unemployment and rising prices on both sides of the border. In Mexico, they say, it could also spur a rise in violence in border areas by pushing the unemployed into the hands of drug cartels, as well as an increase in Mexican migration to the U.S. Manuel Sotelo, a leader of Mexico's National Chamber of Freight Transportation who owns a fleet of trucks that cross the border every day, sees the tariff threats as more of a political power move than a future economic reality. 'Both countries would be paralyzed,' said Sotelo, who sat at a desk covered with local newspapers carrying bold headlines on the tariffs, a Trump bobblehead positioned behind him. 'Let's say he did slap a 25% tariff (on Mexico), what would they do during the Super Bowl without avocados?' On the other hand, Sotelo acknowledges that the tariff talk has already inflicted some damage. He and other business leaders say that over the past year they've watched investment dip in Ciudad Juárez because of political uncertainty, as investors hesitate to funnel their money into businesses that could collapse with the stroke of a pen in Washington. While Trump's election has been the primary driver of that uncertainty, June elections in Mexico and a controversial judicial reform carried out by Mexico's governing party have added to it. Sotelo said he saw a 7% drop in business last year, and only expects that to continue until lingering tariff threats are resolved. One collective of maquiladoras in the city says it has seen at least three factories halt production. Advertisement 'Every time we hear this discourse from political leaders, the people running our governments, it sends shock waves through the border,' Salayandia said. 'Because the border is a global thermometer. Our products go all over the world. Those companies will go look in other parts of the world where they offer conditions to keep competing.' Associated Press journalist Fernanda Pesce contributed to this report.
