Businesses warn about risks of Mexico tariffs

CEOs say move would be 'grave error'

By Jackie Wattles, CNN Business
CNN Video

WASHINGTON, D.C. - Business advocates, companies and trade groups are ringing alarm bells about potential fallout from the Trump administration's decision to threaten Mexico with tariffs.

The United States plans to impose a 5% tax on all goods imported from its Southern neighbor beginning June 10 unless "the illegal migration crisis is alleviated," President Donald Trump said in a statement Friday. The tariffs would quickly escalate, the administration said, potentially reaching 25% by October.

The Mexico tariffs, along with a move by the White House on Friday to strip India of of a designation that made the country exempt from certain tariffs, opened up a new front in Trump's trade policy.

Trump is facing pushback from many sides, including Democrats and Republicans in Congress, corporate leaders, and retailers who have consistently warned that the price of tariffs is ultimately passed on to consumers.

 

US Chamber of Commerce

 

"Imposing tariffs on goods from Mexico is exactly the wrong move," said Neil Bradley, chief policy officer for the US Chamber of Commerce, which calls itself the world's largest pro-business advocacy organization.

The costs "will be paid by American families and businesses without doing a thing to solve the very real problems at the border," he added.

The Chamber said Friday it was exploring legal options to stymie the policy.

 

Business Roundtable

 

Business Roundtable, an association of chief executive officers, said in a statement that it would be a "grave error" to tax imports from Mexico. The group's leadership includes JP Morgan Chase's Jamie Dimon, Lockheed Martin's Marillyn Hewson and IBM's Ginni Rometty.

The association said it "strongly urges" the White House to reverse course and warned that tariffs "would create significant economic disruption and tax U.S. workers, farmers, consumers and businesses."

It will also "jeopardize" American jobs and the USMCA, a revised North American trade pact that has yet to be ratified, the statement says.

"We urge the administration to engage constructively with our neighbors and allies to resolve trade, migration and security issues in ways that will benefit Americans, not cause economic damage."

 

Oxfam America

 

Abby Maxman, president of Oxfam America, called the administration's proposal "shortsighted, harmful, and counter-productive." Oxfam is an international confederation of anti-poverty organizations.

"Escalating tariffs will not deter migration and would have detrimental effects on our economy, Mexico's economy, and the poorest in both countries," Maxman said in a statement. "If anything, this policy will actually increase migration pressures throughout the region."

Maxman also criticized Trump's decision to declare a national emergency at the US-Mexico border.

"The real emergency is that every year, thousands of innocent people — families and children — in Central America have no other choice than to leave their homes to escape violence, criminal gangs, instability, poverty, and economic hardship," she said.

"It is time for Congress to put its foot down on the dangerous acts of this President that threaten constitutional checks and balances of power," Maxman added.

 

National Foreign Trade Council

 

Taxing imports from Mexico is "a dangerous and destabilizing move" and "terrible economic policy," Rufus Yerxa, president of the National Foreign Trade Council, said in a statement.

NFTC is a trade policy advocacy group with more than 300 member companies, including giants like Amazon, Facebook, Google, Walmart, and Coca-Cola.

"The President should reconsider the wisdom of this measure before it causes any real damage," Yerxa said. "It will cause untold harm to American manufacturers, consumers and exporters."

He said the US auto industry will be one of the "biggest victims," farmers and ranchers will face "renewed threats of retaliatory tariffs from their largest export market," and most manufacturers will suffer.

 

National Retail Federation

 

The NRF — a major industry association that represents department stores, chains and other retailers — warned the tariffs would "raise the cost of living for American families."

"Forcing Americans to pay more for produce, electronics, auto parts and clothes isn't the answer to the nation's immigration challenges," NRF senior vice president David French said in a statement.

 

Alliance of Automobile Manufacturers

 

David Schwietert, chief executive of Auto Alliance, called the proposed tariffs a "tax on our customers" that is detrimental to the broader economy.

Auto Alliance represents major carmakers who do business in the US, including BMW, Fiat Chrysler, Ford, General Motors, and Toyota.

Schwietert said in a statement that "any barrier" to the flow of goods between the United States and Mexico "will have a cascading effect — harming U.S. consumers, threatening American jobs and investment, curtailing the economic progress that the administration is working to reignite, and potentially stalling efforts to ratify" the USMCA.

"The auto sector, and the 10 million American jobs it supports, relies upon the North American supply chain and cross border commerce to remain globally competitive," Schwietert said.

 

Volkswagen

 

"We believe that tariffs of this kind are a tax on the US consumer and will result in higher prices and also threaten job growth," Volkswagen, one of the world's largest automakers, said in a statement.

Volkswagen said it has made significant long-term investments in the United States "that would be impaired by restrictive changes to trade."

The company added that it remains hopeful the dispute will be resolved "through constructive negotiations."

VW's stock slumped about 2% on Friday.

Shares of other major car companies also shed value after Trump's announcement, and the broader US stock market took a tumble: The Dow hit four-month lows on Friday.

 

American Apparel and Footwear Association

 

"More than 200,000 jobs in our industry, and countless more across the United States, depend on strong trade linkages with Mexico," Rick Helfenbein, president and CEO of the AAFA, said in a statement. "Whether imposed at 5% or 25%, these tariffs put American jobs in jeopardy."

The AAFA represents clothing manufacturers, suppliers and retailers.

Helfenbein also called the administration's actions "unfathomable, especially as we are working to gain approval of the USMCA in the United States and as the USMCA is about to be introduced in the Mexican legislature."

 

Footwear Distributors and Retailers of America

 

The head of FDRA, an industry organization with members like Nike and Steve Madden, said it is "deeply concerned" about the President's use of tariffs as a "political weapon."

In a statement, Matt Priest, CEO and president of FDRA, said a trade spat with Mexico stands to "further harm US footwear consumers and companies" that are already grappling with higher costs from the standoff with China.

"The shoe consumer is losing across the board if we see higher tariffs, and there is nowhere around it," Priest said.

 

Levi Strauss

 

Levi Strauss shares dropped 7% Friday on tariff worries. The company said 15% to 20% of the jeans and clothes that it sells in the United States are manufactured in Mexico and China.

Mexico is the largest supplier of men's and boy's jeans to America and seventh biggest supplier of footwear, according to a garment industry trade group.

 

Chipotle

 

Fast-casual chain Chipotle, which makes about 450,000 avocados worth of guacamole per day, said the planned import taxes would hurt its bottom line.

"If the announced tariffs are enacted, they would negatively impact our costs," said Laurie Schalow, the company's chief corporate reputation officer. "We are monitoring the situation and working with our suppliers to minimize the impact."

The United States is expected to be more reliant on Mexican avocado exports this year after a rough growing season in California.

Chipotle shares fell about 3% on Friday. It's not clear whether increased costs would lead to higher menu prices.

 

Tariffs Hurt the Heartland

 

A coalition of trade organizations from the agriculture, tech, retail, services, and manufacturing industries said in a statement that the tariff proposal "once again" puts consumers "in the crossfire of a trade war they never asked for and didn't start."

"Forcing Americans to pay more for everything from avocados and beer to jeans and electronics as a means to address border security makes no sense," the group said. "And using tariffs to address unrelated policy objectives sets a dangerous precedent while creating significant uncertainty for American employers who are living tweet-by-tweet while trying to plan their business."

The coalition also cautioned that the White House's actions will "likely invite retaliation" from Mexico. Their remark was issued through "Tariffs Hurt the Heartland," a multimillion-dollar free trade campaign they started in September 2018.

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