Late Friday evening, the United States and Mexico announced that they had reached an immigration policy deal that would in-essence, ward off the imposition of a series of escalated U.S. import tariffs. While multi-industry supply chains can breathe a sigh of relief, the U.S. tariff action inserts yet more uncertainty to geopolitical tensions and a smooth ratification of the recently negotiated United States, Mexico and Canada Trade Agreement (USMCA)NAFTA to USMCA

On Friday evening Washington time, after days of what has been described as intense negotiations, President Donald Trump tweeted that the United States had agreed to indefinitely postpone threatened escalating import tariffs on goods originating in Mexico.

In exchange, Mexico agreed to implement measures to slow the stream of migrants across its territory, headed to the U.S. southern borders.  While Republicans praised the agreement and expressed relief, rival Democrats denounced the action as an example of the creating a trade crisis to bludgeon a close trade partner.

From the consensus of general media reporting, the actions that Mexico agreed to were mostly those previously agreed to in past discussions, but this time with concerted actions to enforce such actions. Reports indicate that the newly formed Mexico National Guard will be deployed to the country’s border with Guatemala, while migrants seeking asylum in the U.S. will have to wait in Mexico for processing approval.

The agreement reportedly calls for both sides to review the deal after 90 days, and supposedly if the immigration measures are not meeting expected results, they will lead to further actions. Yesterday, President Trump was once again took to Twitter to again threaten escalating tariffs with Mexico if he was not pleased with ongoing progress. The Washington Post wrote over the weekend that the crisis strengthened the political consensus around President Andres Manual Lopez Obrador’s Administration, which was already quite high, and that the crisis: “may do long-term harm to future U.S.–Mexico ties.

Supply Chain Matters Perspectives

Needless for Supply Chain Matters to state, these latest tariff actions add more uncertainties to the multi-industry supply movements of materials and components across North American based supply networks. There is especially concern for domestic and global automotive supply networks where NAFTA has provided an integral framework of tariff-free multiple intra-border movements.

As noted in our prior commentary, this latest development concerning the U.S. and Mexico, one of its closest trading partners, spills into domestic immigration policy and consequent punitive trade actions. It indeed has sent a chill into cross-border trade and has added much uncertainty as to ongoing investment. From our lens, it further jeopardizes a smooth ratification process for the newly negotiated USMCA trade agreement which was planned to ratification later this year.


© Copyright 2019, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.