Mexican Tariffs Threaten US Chemicals Sector

Cascade of Unwanted Economic Consequences

Proposed tariffs on Mexican goods entering the U.S. would have a harmful effect on both countries, and threaten the U.S. chemicals sector, according to the American Chemistry Council.

President Trump last week raised the prospect of a wide-ranging tax on all Mexican goods crossing the border in response to perceived immigration crisis on the U.S. southern border.
“On June 10, the United States will impose a 5 percent 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 tariff will gradually increase until the Illegal Immigration problem is remedied,” Trump tweeted.

US$23 Billion of Exports at Risk
Strong growth in the U.S. chemical sector has helped spur breakbulk growth in the U.S., particularly in southern states and the Gulf region, the same region where the Trump administration is focused on preventing immigration.

“We stand with our business and coalition partners in urging the President and Congress to find a better way to secure our borders. Around US$543 million in chemical products cross the U.S.-Mexico border every week, and Mexico purchases more U.S.-made chemicals than any other trading partner – nearly US$23 billion in 2018,” said Ryan Baldwin of the ACC.

Retaliatory Taxes

The ACC notes that chemical exports from the U.S. to Mexico in 2018 amounted to US$22.9 billion while chemical imports from Mexico to the U.S. in the same year amounted to only US$5.4 billion.

“A tax on all imports from Mexico, followed by Mexico’s likely retaliation on U.S. chemicals exports, would erect huge cost barriers between American manufacturers and the products they depend on to succeed,” Baldwin added.

Predicting a “cascade of unwanted economic consequences,” the ACC cites increased uncertainty for the sector as having important knock-on effects for U.S. manufacturing, seriously weakening competitiveness.

 “Trade agreements like the USMCA are designed to remove tariffs and prevent non-tariff barriers to trade,” the ACC notes, highlighting the need for a “highly-integrated and efficient North American chemical supply chain.”
Based in Washington, D.C., the ACC is an independent trade association committed to fostering progress in global relations for the domestic industry. The association estimates that the U.S. chemicals industry accounts for 10 percent of all U.S. goods exports and construction of industry facilities remains a major source of breakbulk activity.