Mexico has one year to get its act together.
Not all American car companies build their cars in America, in case you didn't already know. Ford, for example, has a production plant in Mexico that previously built the Fusion. The Chevrolet Blazer, Nissan Sentra, and Dodge Journey are also built south of the border, to name just a few. Automakers are attracted to Mexico because of cheaper labor costs, a major issue for American auto workers. President Trump has not been silent on this issue, to say the least, and his latest threat against Mexico involves car tariffs.
Bloomberg reports that while Trump retreated from his threats to shut down the border with Mexico over illegal migration, he came up with a new demand late last week: stop the flow of illegal drugs into America or face car tariffs.
"If the drugs don't stop – Mexico can stop them if they want to – we are going to tariff the cars. The cars are very big, and if that doesn't work we are going to close the border," the president said. "We are going to give them a one-year warning." The car tariff threat is also being used against Mexico to step up its role to prevent Central and South American migrants from crossing into the US.
"Mexico, understand that we are going to close the border or I'm going to tariff the cars," Trump added. "I'll do one or the other but probably settle for the tariffs. That will be a very powerful incentive."
These tariffs would not only hurt the Mexican economy and automakers, but also American car buyers. If Trump follows through on his threat, then automakers will have little to no choice but to pass down some of the new costs to consumers. Automakers will only be able to absorb some of the added costs.
This isn't the first time the president has used the threat of tariffs when negotiating issues such as trade, but it is the first time he's used them as leverage to stop the flow of illegal drugs in the US in such direct way.