U.S. automotive tariffs deepen industry pressures, halt investments in Mexico

Long-standing challenges in Mexico's automotive industry have been exacerbated with the implementation of the U.S. tariff on imported cars, which took effect Thursday, fueling uncertainty and job losses.

Last month, U.S. President Donald Trump announced a 25 percent tariff on all imported automobiles.

Ciudad Juarez, one of Mexico's largest trade ports and a key manufacturing hub, is now facing even greater challenges as rising trade protectionism deepens existing pressures.

At a medal parts manufacturing factory that has been in operation for over 30 years, the workforce has drastically reduced from 60 workers to just 25 due to uncertainty about the future.

Even before the U.S. tariffs on imported cars took effect, mounting pressure had already begun to ripple through the industry, prompting many companies to suspend investment and procurement plans.

"Some 95 percent of the products exported from Chihuahua, where Ciudad Juarez is located, are industrial manufactured goods. We have held multiple meetings to discuss solutions. In fact, over the past year and a half, more than 55,000 factory workers here in the city have lost their jobs," said the owner of the factory.

The automotive industry is a key pillar of Mexico's economy, generating nearly 100 billion U.S. dollars in output. The auto parts assembly industry alone provides over 900,000 jobs for the country, while automotive assembly companies create 175,000 jobs.

According to statistics from the Mexican Association of Automotive Dealers (AMDA), over 40 percent of the components used by American auto manufacturers are imported from Mexico. Last year, Mexico produced four million cars, approximately three million of which were exported to the U.S.

Industry insiders indicate that due to the high degree of interdependence in the sector between the U.S. and Mexico, along with a shortage of skilled labor, the U.S. goal of bringing automotive manufacturing back to its shores through tariffs is unlikely to be realized in the short term.

Moreover, the established industrial chain in Mexico faces the risk of being disrupted, which will ultimately have repercussions on consumer spending and further exacerbate inflation in the long run.

"Young people from the U.S. are no longer willing to work in the manufacturing sector. I believe there will be no growth in the relocation of automotive parts and vehicles factories in the short term," said Guillermo Rosales Zarate, ADMA's executive president.

"Personally, I hope this avalanche of tariffs doesn't continue; otherwise, it will lead to more significant issues affecting the U.S. economy. If these tariffs remain in place long-term, it will be the American people who suffer the most," said Ricardo Ramos, a professor with the Autonomous University of Ciudad Juarez.

U.S. automotive tariffs deepen industry pressures, halt investments in Mexico

The universal "reciprocal tariffs" imposed by the United States signals a decline in the U.S. economic dominance and dollar hegemony, as the country is attempting to extract excessive financial benefits from its trading partners, according to economists, who warn the Trump administration is playing a "dangerous game".

U.S. President Donald Trump last week signed an executive order on the so-called "reciprocal tariffs," imposing a 10-percent "minimum baseline tariff" before unveiling higher rates on certain trading partners. The policy sent shockwaves throughout the global economy and triggered panic on financial markets, with analysts warning of significant risks and dire economic consequences.

In an interview with the China Global Television Network (CGTN), Hong Hao, chief economist of the GROW Investment Group, a Shanghai-based hedge fund, said the tariffs reflect Trump's strategy to extract economic benefits from trading partners, particularly viewing China as a significant competitor. "Trump really believes that the trade terms with the trading partners have been unfair to the U.S., and as a result, the U.S. manufacturing sector has been hollowed out. Therefore, the U.S. is paying an excessive price for globalization, and now, it's time to pay back. I think, from this angle, he is trying to extract economic rent from its trading partners, and also he is trying to see China as one of the major U.S. rivals at this juncture. So, I think, as a result, he is playing a very dangerous game. And, as you can see, it's political theater in the sense that he is trying to dramatize the extreme pressure, so that he can get excessive rent from the opponent," he said

Trump's unilateral imposition of tariffs has eroded global confidence in the U.S. and its dollar's status, leading many to state that the American hegemony may not persist, according to Josef Gregory Mahoney, a professor of politics and international relations at East China Normal University.

"The U.S. economy is at an inflection point. There is a moment where the previous strategies being used to sustain American hegemony were no longer working. And, it's only a matter of time before the U.S. position erodes, given the fact that it's been a house of cards built on the dollar supremacy. And a lot of people don't see that as having a brighter future. This has moved past the theater stage and has moved really directly into one in which no one really has confidence in the U.S. anymore. No one has confidence in the dollar. No one has confidence in the U.S. being committed to the multilateral system, to global trade and so forth and so on," he said.

Trump playing "dangerous game" as tariff measures signal decline in U.S. dollar hegemony: economists