MEXICO RETALIATES

March 19, 2009

When the United States closed the southern border to Mexican trucking last week -- in violation of the North American Free Trade Agreement -- Mexico promised to retaliate.  Yesterday it did, releasing a list of 89 U.S. products that will face new tariffs of 10 percent to 45 percent.

Trade wars are never pretty.  But given the downturn in demand that already exists in the U.S. economy, this one could be ugly, and dangerous, says the Journal.  Mexico is the third largest trading partner of the United States and the new tariffs will affect some $2.4 billion in goods across 40 states.

California, an important supplier of fresh fruits, dried fruits and nuts to Mexico, will be hit hard:

  • Table grapes will face a 45 percent duty at the Mexican border; wine, almonds and juices among other agricultural products will pay 20 percent.
  • Some 90 percent of Christmas-tree exports from California and 65 percent from Oregon go to Mexico; it's doubtful volumes will hold up beneath a 20 percent tariff.

Alongside Oregon, Washington state will pay dearly:

  • Four out of 10 pears that the U.S. exports go to Mexico and half of those come from Washington.
  • Under the new rules, American pears now face a 20 percent tariff, as do a host of paper products from the Pacific Northwest and Wisconsin.

Other states will also be affected:

  • Wisconsin's scrap battery industry, which exports $128 million annually to Mexico, won't be as competitive after it pays a 20 percent tariff.
  • Nor will New York's $24 million annual exports in personal hygiene products or its exports of $250 million in precious-metals jewelry.
  • President Obama's home state of Illinois can't be happy to learn it will lose competitiveness under a 20 percent tariff on its plastic tableware and kitchenware exports to Mexico ($57 million annually) and on its printed leaflets and brochures ($68.7 million).
  • North Dakota Senator Byron Dorgan sponsored the amendment that closed the border and his constituents will pay; North Dakota only exports $1 million in oil seeds annually but 80 percent of that goes to Mexico -- they now face a 15 percent tariff.

Source: Editorial, "Mexico Retaliates," Wall Street Journal, March 19, 2009.

 

Browse more articles on Economic Issues