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U.S. to Impose Tariffs on All Goods from Mexico

In an effort to push Mexico to address immigration issues, President Trump announced on 30 May that a five percent tariff will be imposed on all goods imported from Mexico effective 10 June. If Mexico does not take action to “dramatically reduce or eliminate the number of illegal aliens crossing its territory into the United States,” the tariff will be raised to 10 percent on 1 July, 15 percent on 1 August, 20 percent on 1 September and 25 percent on 1 October.

The tariff will permanently remain at 25 percent unless and until Mexico “substantially stops the illegal inflow of aliens coming through its territory.” The White House statement stresses that the tariff will only be removed if the illegal immigration crisis is “alleviated through effective actions taken by Mexico, to be determined in our sole discretion and judgment.”

The president is invoking the authorities of the International Emergency Economic Powers Act of 1977 to impose these tariffs on imports from Mexico. This statute has previously been utilised to freeze or block assets of foreign governments or nationals but never to impose tariffs in this fashion. Similar to previous tariff actions initiated by the administration, it is anticipated that this action will mean additional tariffs on top of existing rates of duty, including on goods qualifying for duty-free treatment under the North American Free Trade Agreement. The White House is expected to provide additional details on these tariffs in a Federal Register notice prior to the tariffs entering into force.

Meanwhile, a high-level Mexican delegation travelled to Washington, D.C., on 31 May in an effort to find a mutually-acceptable solution to the illegal immigration issue and stem the imposition of the tariffs. Mexican President Andrés Manuel López Obrador has tried to strike a conciliatory tone focused on bi-lateral dialogue, but Mexican Under Secretary for North America Jesús Seade reportedly stated that his country would respond “forcefully” if the tariffs are applied.

Remarkably, Trump’s announcement came shortly after he formally initiated the process for Congress to consider and approve the United States-Mexico-Canada Agreement. On 30 May, U.S. Trade Representative Robert Lighthizer submitted to Congress a draft statement of administrative action to implement the USMCA as well as a copy of the final text of the agreement as it now stands. Under the Bipartisan Congressional Trade Priorities and Accountability Act of 2015, the White House is required to send such a statement to Congress at least 30 days prior to the submission of the final text of the agreement together with a draft implementing bill and certain supporting information.

The submission of the draft statement of administrative action was not received warmly by the House Democratic leadership. Speaker of the House Nancy Pelosi (Democrat-California) declared that this action by the White House is “not a positive step”, while House Ways and Means Committee Chairman Richard Neal (Democrat-Massachusetts) said that Democrats “have been clear about the need for improvements to the renegotiated NAFTA as it stands now” because the current agreement “does not adequately protect American workers and the environment, limits Congress’ ability to address rising U.S. health care costs in the future, and fails to provide effective enforcement tools.”

Besides Democrats’ concerns, congressional consideration of the USMCA is expected to be impacted by the decision to impose additional duties on all imports from Mexico. Additional delays in the consideration and implementation of the agreement are likely if this dispute is not successfully resolved.

Content provided by Picture: HKTDC Research
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