Tariffs to Mexico: Opportunity for the Region?

The plan to impose a 5% tariff on Mexican products entering the U.S. would open up opportunities for Central American countries to increase their sales to the U.S., but there are fears that similar measures could be taken against the region.

Monday, June 3, 2019

On May 30, President Trump announced on his Twitter account that he plans to impose a 5% tariff on Mexican products entering the U.S. market, this as pressure for Mexico to be more effective in its efforts to contain the massive arrival of Central Americans to the country.

This controversial measure, which has not yet materialized, generates an interesting discussion in the region, regarding what impact this would have in Central America and what opportunities could capitalize Central American companies.

Julio Dougherty Monroy, Guatemala's vice minister of foreign trade, told Prensalibre.com that "... the creation of U.S. tariffs on goods exported by Mexico could represent a much more efficient opening to domestic supply.

Dougherty added that "...all the opportunities represented by the U.S. market are being taken advantage of. The issue between the United States and Mexico is not perceived as a threat to Guatemala, and the opportunities are in us."

Fanny D. Estrada, director of the Guatemalan Association of Exporters (Agexport), said that "... the announcement of a 5% increase in tariffs to Mexico will have implications for world trade. In the case of Guatemala, which competes at a disadvantage with Mexico for the exchange rate, it would be a compensator that could help."

The Trump administration's announcement is not perceived as an opportunity by the entire Central American business sector. Guillermo Jacoby, president of the Association of Producers and Exporters of Nicaragua (APEN), explained to Laprensa.com.ni that "... the region must be on alert because the announcement of Trump shows that it can now take action against the problem by affecting the DR-Cafta for migratory reason, which would undermine the competitiveness of Central American products at the time of wanting to enter the world's first market.

Jacoby added that at this moment "... Trump's tariff war against China becomes an opportunity for Central America, given that many Chinese companies are planning to move their maquilas to the region to export more competitively to the United States under DR-Cafta. However, that opportunity may be lost if the U.S. government decides to take commercial action against Central America as well, just as it is doing with Mexico, because in the end the migratory boom is focused on the region."

The annual exports of Central American countries as a whole to the U.S. amount to between $10 billion and $11 billion, being Costa Rica, Guatemala and Honduras the economies that sell more to the North American country.

See article in Prensalibre.com "What effect would Trump's plan to charge Mexico a 5% penalty tariff have on Guatemala" and Laprensa.com.ni "Tariff of 5% imposed by Donald Trump on Mexico should alert Central America."

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