When President Donald Trump slapped Chinese goods with a spate of new tariffs last year, several companies sought to adapt by moving their supply chains from China to Mexico, which was still a relatively stable trading partner with the United States.
Now, according to The New York Times, Trump's newest tariffs on Mexico are causing yet another scramble as companies that moved there are forced to adapt yet again.
"Mexico was the place that people were looking to move to," said Joseph Fitzgerald, a supply-chain expert at the accounting firm Deloitte. "Now it's, 'Gosh, we just got through one wave of supply chain strategy and structural change and now we need to start a new round.'"
Unlike the trade war with China, which is mainly economic, the trade war with Mexico is more overtly political. This week, Trump imposed a 5 percent tariff on Mexican goods, and warned that the tariff will slowly increase until the Mexican government does more to prevent Central American migrants from crossing the U.S. border — an issue that has been a key obsession of his presidency.
But disrupting trade between the United States and Mexico may have an even larger impact. As the Times notes, the same goods routinely flow both ways across the border — for example, refiners in America import Mexican oil, refine it into gasoline, and then export the gasoline back to Mexico. Tariffs on the practice could hurt producers and consumers in both countries.
"We're taxing ourselves on our own goods," said University of California economist Katheryn Russ.