In a surprise move that could damage the Arizona economy, President Trump declared late Thursday that he will impose a 5% tariff on all Mexican imports — gradually rising to 25% — until illegal immigration through that country into the United States “stops.”
Arizona imported $9 billion in goods from Mexico — its No. 1 trading partner — last year.
Gov. Doug Ducey appeared to side with the president. “I prioritize national security and a solution to our humanitarian crisis at the border above commerce,” Ducey said, adding he is personally opposed to tariffs.
But Glenn Hamer, president of the Arizona Chamber of Commerce and Industry, said Trump’s announcement is “baffling and, if carried out, will be terribly damaging.’’
“This will only inflict harm on the U.S. consumer,” Hamer said.
Ducey said he has reached out to “our friends in Mexico,” including elected officials, law enforcement and the faith community, to “work together to alleviate this crisis.”
Trump’s action, first announced in a Twitter post, comes as he is increasingly frustrated with migrants from Guatemala, El Salvador and Honduras showing up at the U.S. border and seeking asylum. It comes just hours after Trump, speaking at the White House, vowed “very dramatic” action to address the situation.
“On June 10th, the United States will impose a 5% Tariff on all goods coming into our Country from Mexico, until such time as illegal migrants coming through Mexico, and into our Country, STOP,” the president tweeted.
Trump, in a follow-up prepared statement, said the tariffs will go to 10% on July 1, 15% a month later, 20% a month after that, and finally to 25% by Oct. 1.
“Tariffs will permanently remain at the 25 percent level unless and until Mexico substantially stops the illegal inflow of aliens coming through its territory,” the statement says. The question of whether Mexico has taken the proper steps to stem the flow — and whether to end the tariffs — is “to be determined in our sole discretion and judgment,” it adds.
Mexico, consistently one of the U.S.’s top three trading partners, sent the United States $346.5 billion in goods last year — meaning that a 5% tariff on those products would amount to a tax increase of more than $17 billion, The New York Times reported.
A total of $16.4 billion in U.S. imports from Mexico came through ports of entry in Arizona last year, University of Arizona statistics show.
Hamer pointed out that tariffs are not paid by the foreign country or even the foreign company that is exporting the goods, but are added on to the costs for customers here. Hamer said there will be specific impacts on Arizonans — and not just in making avocados more expensive.
He specifically cited disruption of the supply chain for the state’s nascent auto manufacturing industry. And that, said Hamer, exists largely because of the supply chain with companies in Sonora.
One example is Lucid Motors, which is planning to build electric cars in Pinal County, with the parts built in Mexico and shipped to Arizona for final construction. A huge tariff, said Hamer, “could put those investments at risk.”
It’s not just Lucid, he said, as other cross-border enterprises are working on things like self-driving trucks.
Hamer predicts other economic fallout for Arizona. He said there are about 300,000 jobs in the state — close to 10% of the economy — that are linked to tourism, with Mexican visitors spending $7.5 million a day in Arizona. And Hamer said that for many border communities, more than half their sales taxes can be linked to cross-border visitors.
“I would suspect that if our friends from Mexico feel that this is an unfairly targeted tariff they may be less likely to visit the United States,” Hamer said.
The president, however, does not see the tariffs as potentially harming the U.S. economy.
“The sustained imposition of Tariffs will produce a massive return of jobs back to American cities and towns,” his statement read.
The announcement comes as the administration has been pushing for passage of the United States-Mexico-Canada Agreement that would update the North American Free Trade Agreement.
The White House said Trump would be using the International Emergency Economic Powers Act to enact the tariff.
Hamer did not dispute the concerns of the White House about a flood of immigrants, particularly from Central America, arriving at the U.S. border. Immigration officials say they expect to have to deal with close to a million people along the southern border this year, double last year’s number.
Adding to that are legal restrictions that keep immigration officials from keeping people in custody until they can get a hearing on their asylum claims, forcing their release into communities and potentially sending the message that those who can get here will remain free, possibly for years.
But Hamer said lashing out at Mexico — in a way that could hurt Arizona’s economy — is not the answer.
“It’s not Mexico’s fault that we don’t have enough immigration judges,” he said. “It’s not Mexico’s fault that we have refugee laws that are in need of updating.”
Trump, however, accuses Mexico of “passive cooperation” with those coming up through that country’s southern borders.
“Mexico has very strong immigration laws and could easily halt the illegal flow of migrants, including by returning them to their home countries,” Trump wrote.