High efforts for global companies in Trump’s latest customs threats

Mexico’s pitch for companies that considered the US market was simple. Concerned with vulnerable supply chains? Need to reduce your dependence on China? Want a cheap place close to the US with favorable trade rules? Try Mexico.

Thousands of companies, from family companies to Powerhouse brands, in Asia, Europe and other places have done just that in recent years. Adidas, Samsung, Honda, Hyundai, Nestle, Volkswagen, Volvo, Lego and more crowd Mexico’s industrial parks.

This parade has grown after pandemic-related supply chain nightmare and increased political tensions between the United States and China. Canada – a key partner in the North American production network – has also benefited. Last year, Honda announced plans to invest around $ 11 billion in new electric vehicle and battery production systems in Ontario along with its existing facilities. Toyota and Volvo also have plants in Canada.

But now President Trump’s threat of imposing a 25 percent duty on all imports from Mexico and Canada has already hit companies like a freak ice cream storm in the summer on Saturday.

“If you are an investment manager sitting in a C-suite, how do you decide where you want to put money?” Asked Mary E. Lovely, a senior mate at the Peterson Institute for International Economics in Washington.

President Trump even signed a new trade pact with Mexico and Canada in 2020 during his first period. Now he’s actually ripping up this contract.

It is disorienting to any business, Mrs Lovely said, because trade agreements are intended to create “secure spaces” for long -term investments.

Mr. Trump also said he would introduce new 10 percent duct rates on all imports from China starting on Saturday.

So far, other Asian asian as well as European trading partners let go of the first round of the president’s deadlines.

Still, they still have to stiffen for the unexpected fall of tariffs beaten in Mexico and Canada.

Japan alone has more than 1,300 companies operating in Mexico, with more than half of them in the manufacturing sector. Some are car suppliers who changed production from China in Mr. Trump’s first period when he started a trade war with Beijing. In November, Japan’s Toyota said it would invest an additional $ 1.45 billion in its two Mexican plants.

More factories are on the way. In October, the Taiwanese electronics giant Foxconn advertised Plans to build a mega factory in Mexico to produce Nvidia chips.

“It is ironic because there was such an answer to the first tariffs to restructure supply chains, and now you are basically punishing the countries that benefit from this adaptation,” said Albert Park, chief economist at the Asian Development Bank.

In Honda, a director said there was a feeling of unbelievers when Mr. Trump warned of customs duties on goods, not only from Mexico, where Honda operates a car facility in Celaya, but also from Canada.

Mexico is the largest exporter of car parts to the United States. For example, Honda produces about 200,000 vehicles in Mexico and sends about 160,000 of them to the United States. American car manufacturers such as General Motors and Ford Motor, which have large plants in Mexico and Canada, would be in the same way affected by customs.

At a news conference in November, Honda’s Executive Vice President, Shinji Aoyama, said long -term tariffs would be scary. “Can companies actually stop producing in Mexico?” He asked. “It’s really hard to do.“

Mexico is also home to other major manufacturers manufacturing space equipment, electronics, household appliances and more. It is the largest exporter of medical devices to the United States.

Hundreds of Chinese companies, including electronics manufacturer Lenovo and carmaker Chery, have also migrated to Mexico in the hope of sitting down duty rates. BYD, China’s leading electric vehicle company, has scouted a production site in the country.

All of these companies — what is either from Asia, Europe or the United States-Ville also have to fight with extra tasks on components they import from China, which remains the go-to source to many of the parts, tools and equipment .

Mr. Trump said the latest customs threats were intended to help stop the flow of migrants and fentanyl. However, a long -term goal is to push companies to build more plants not only near America’s banks but on them.

“Come and make your product in America,” Mr. Trump in a television talk To the World Economic Forum this month. If not, “Then you have to pay a duty very much.”

Many companies have already done so. Some were in response to endangered tariffs; Others to change trading patterns.

Last year, Reckitt, a British company, quoted shipping logjams quoted for his decision to move some production of Mucinex-it top selling medicine over-the-counter medicine in USA-to North Carolina from Mexico and the UK. After the pandemic disturbed the cold and flu season and led to low supplies, the company would make sure it could get mucinex in the store shelves faster.

Denmark’s LEGO, the world’s largest toymaker, has its largest factory place in Mexico. By 2022, it announced plans to build a facility in Virginia. The reason, Lego said, was to shorten his supply chain and move closer to the East Coast Transport Home Points.

In 2017, Toyota promised to invest $ 10 billion in US production over five years, shortly after President Trump, during his first period, threatened to issue duty against the company. Toyota builds a battery production facility in North Carolina, and by 2021 it opened a vehicle in Alabama that it operates with Mazda.

Mr. Trump’s latest threats are again asking companies to consider their options. Among them are two South Korean electronics giants.

LG Electronics and Samsung Electronics are both considering moving some of their production of household appliances to the United States, according to local media reports. (Spokenmen for both companies refused to comment.)

Mazda, which sends approx. 70 percent of the vehicles it creates in Mexico to the United States said it could change part of this production to the Alabama plant, as it is jointly running with Toyota.

For many companies, it is unrealistic to move a large production to the United States, said Agathe Demarais, a senior policy fellow at the European Council for Foreign Relations.

The cost is too high. American workers are unwilling to accept the low wages that initially caused companies to move to countries like Mexico.

Mazda and Toyota have already struggled to increase production at their common US factory due to lack of workers.

These days, Ms. DeMarais, big companies may be able to do their best to stay under the radar and wait for Trump’s period. Opening a larger production facility takes billions of dollars and a lot of time.

And business leaders can be wary of investing in the United States when the policy is so unpredictable. Last week, for example, the president raised unexpectedly the opportunity Doubling taxes on foreign nationals and businesses.

More important, Ms. DeMarais, is that companies recognize that global trade is increasingly organized around trade routes that reflect the growing rivalry between the United States and China – such as the regional involving Mexico and Canada.

“It’s a structural trend that will surpass Trump,” she said.

Meaghan Tobin Contributed with reporting from Taipei, Taiwan.