TIJUNA, Mexico (Reuters) — In the border cities between Mexico and the United States, many businesses have already felt the so-called “Trump effect.”
The value of Mexico’s currency, the peso, has plunged further following a series of tweets and state
ments by U.S. President Donald Trump, who threatened to impose tariffs on Mexican products and renegotiate North American Free Trade Agreement (NAFTA).
That’s not good news for people like Eduardo Martinez, who runs a car lot that buys cars in the United States and resells them in the Mexican city of Nuevo Laredo. The weaker peso has cut into his profit so much that he was ready to quit.
“We don’t make enough money by selling cars. We just want to sell our inventory and move on to another business, because this depends on the dollar and the dollar is too expensive. I am going to start a taco stand instead,” said the car dealer.
According to the U.S. Chamber of Commerce, six million U.S. jobs depend on the trade relationship between the two countries. If NAFTA is changed, those jobs could be at risk. And if new regulations favor the U.S. manufacturing sector, many companies that depend on the low wages of Mexican labor would have to rethink their business strategies in order to survive.
Craft brewer Carlos Cristiani has been producing his beer in Tijuana, Mexico, and selling it to the United States, his main market. However, all that could change.
“The taxes on importation are fairly low as are for U.S. beer going into Mexico, so without NAFTA, our product would be incredibly expensive here, we would not be able to compete. Maybe we need to invest in a plant in the United States as well, because we want to put our eggs in different baskets,” said Cristiani.
Besides, analysts also warn of another possible consequence of a weakening peso. A dramatic rise in the cost of living that ensues might actually push more of Mexico’s poorest residents to illegally cross into the United States. This would reverse the current trend of more Mexicans returning to their hometowns from the United States than leaving the country.
“That’s the big irony and contradiction of what Donald Trump is doing. His actions are affecting the economy of Mexico. Obviously when our economy is doing poorly, more people are going to want to go to the United States,” said Jorge Sanchez, an economist.
President Trump has said that moving factory jobs back to the United States is one of his main priorities. If he implements new restrictive trade measures, he may set on a path deviating from some of the goals he campaigned on.
