Mexican Tariffs Are Off for Now but Manufacturers Still Cautious

The Trump administration’s threat to impose a 5 percent tariff on all goods imported from Mexico did not go into effect on June 10 as threatened.

But trade worries over Mexican tariffs are not over. President Trump is only shelving his tariff proposal, which could eventually rise to a 25 percent tariff on imported Mexican goods if Mexico doesn’t curtail the number of migrants coming from Central America, passing through Mexico and arriving at the U.S. border to seek refugee status.

Apparel and textile manufacturers are watching and still concerned because the recently renegotiated North American Free Trade Agreement, now called the United States-Mexico-Canada Agreement, was expected to put some certainty into trade between the three countries and had eliminated tariffs on many imported goods.

“NAFTA was predictable and solid for decades. The negotiations concluded and it looked like we were moving toward a situation that would offer a predictable future,” said Steve Lamar, executive vice president of the American Apparel & Footwear Association, which represents hundreds of U.S. companies that manufacture garments in overseas factories. “Now you can be in Mexico but not know that tariffs aren’t going to be a constant threat.”

Even though 5 percent doesn’t sound like that much, it can be a make-or-break situation for many apparel makers who are operating on very tight margins. Even though it wasn’t implemented, many manufacturers were already putting together a game plan to move out of Mexico if tariffs got worse.

“All last year there was talk of a NAFTA withdrawal, and no one knew what was going to happen next,” Lamar said. “People were making their plans to move. For the last six months, they put those plans away, but now they are at the front of the desk again.”

With the Trump administration thinking about slapping additional tariffs on apparel products coming from China, Mexico was hoping that U.S. sourcing managers would take a look at factories south of the border in a country that has a strong garment-manufacturing industry.

But that hasn’t happened so far. According to the U.S. Department of Commerce, the United States imported $3.3 billion in apparel from Mexico for the 12 months ending April 2019, down 3 percent over the previous 12-month period. Still, that country does a considerable amount of business in blue-jeans manufacturing and has several denim mills, including one owned by U.S.-based Cone Denim.

When the Mexican tariffs were threatened, a long list of trade groups sent a joint statement to the U.S. Trade Representative, Robert Lighthizer, opposing the tariffs. They noted the tariffs would harm U.S. consumers, workers, farmers and businesses of all sizes across all sectors. “Tariff-free trade in North America is a cornerstone of U.S. economic growth, supporting over 12 million American jobs and lowering prices for American consumers,” the joint statement said.

It was signed by the California Chamber of Commerce, the Los Angeles Chamber of Commerce, the National Retail Federation, the American Apparel & Footwear Association and the U.S. Fashion Industry Association.

Despite the ongoing threat of tariffs, many manufacturers importing goods from Mexico don’t believe new tariffs will be imposed. Robert Krieger, president of the Los Angeles customs brokerage company Krieger Worldwide, said he has talked to his customers about the issue. “I think the general consensus is there won’t be punitive tariffs against Mexico.”