Trump’s tariffs: The US will now find out just how much it needs Mexico

After much dithering, President Donald Trump’s administration announced the date on which 25 percent tariffs will be imposed on most goods entering the United States from Mexico and Canada. T-Day is set for February 4 when some retaliatory measures from its neighbours will also take effect.

Americans are now bracing for what they expect will be higher prices on imported goods. So far, the US media have focused mainly on cutesy examples like tequila, avocados and beer, so there is a tendency to underestimate the effects of the tariffs. However, American households will inevitably be hit hard well beyond their alcohol and groceries.

Indeed, imposing tariffs in a region where trade is so deeply integrated is a recipe for disaster. Let us take the case of US-Mexico relations. Mexico is the largest commercial partner for the United States with more than $1.2m worth of goods passing across their shared border every single minute. Yet Mexico’s economic significance is underestimated at every turn because the country is constantly being portrayed to the American public as an impoverished failed narco-state. Indeed, this depiction is exactly the one Trump needed to invoke the emergency powers required to trigger these tariffs.

The US president couldn’t be more wrong when he says the US doesn’t need Mexico. He’s so wrong that by implementing the tariffs, not only will he trigger inflation – because Americans will pay more for the goods the US doesn’t produce – but he will also undermine the very industries he wants to protect. Whatever retaliatory measures the Mexican government decides to pursue will make this even worse for US consumers and various industries.

Even some of the products that the rather superficial analyses on US media focus on – such as beer – demonstrate just how disruptive this irrational move will be. Mexico is a big producer and exporter of beer, but to maintain this industry, it buys 75 percent of US barley exports. Any disruption in beer production in Mexico due to lower demand from its biggest buyer – the US – will inevitably hit US barley producers. The situation is similar for thousands of other products that depend on cross-border supplies.

A Trump supporter might rebut: “Suck it up and drink American. Disrupted supply chains will recover.” This is easier said than done, but assuming it were possible to relocate everything to the US, Americans would still be faced with a disastrous situation.

Take the North American auto industry. It is spread across the region, boosted by the US-Mexico-Canada Trade Agreement (USMCA), so that vehicles can cross to and from the US and Mexico as each country gradually adds value to each car and truck. The Trumpian logic asserts that tariffs will force automakers to bring back all production to the US and keep all that value for themselves.

It won’t happen, and this is why.

In this industry, high-skilled but low-paid jobs that have proven stubbornly difficult to automate are often done in Mexico. No skilled labourer in the US or Canada would ever accept the wages Mexicans are willing to take, and these workers add crucial parts all along a vehicle’s production. The final result is a car that is affordable but also provides well-paying jobs stateside.

It is thanks to this system that the US is the world’s fifth largest auto exporter and Canada and Mexico are some of its top customers. It is a position the country is only able to keep thanks to skilled Mexican workers keeping the price down. Short of banning all car imports, China and other established, efficient car-making countries could easily undercut Made-in-America vehicles, even with hefty tariffs.

It is also worth noting that if manufacturing relocation to the US were enforced – in a tragic twist of fate given Trump’s mass deportations – companies would be incentivised to hire undocumented labour to skirt minimum wages and lower prices, just as the agricultural and construction industries already do.

Ultimately, Trump is right about one thing. When it comes to North American trade, one side has been subsidising the other. But it hasn’t been the US subsidising Mexico or Canada, as he says. It has been Mexican workers who have been subsidising the US, its corporate profits and its consumers.

There is still a way to fix this.

While Trump and US economic nationalists blame Mexicans for “stealing” their industrial jobs, Mexico has been working to make the entire North American supply chain more robust while addressing US workers’ very real concerns about companies depressing Mexican wages. The Mexican government has done this by doubling the minimum wage and taking steps towards strengthening unions while keeping labour costs competitive.

If American workers truly want to protect their jobs without sinking to Trump’s xenophobic rhetoric, transnational collaboration between unions in the US and Mexico is the right way to bolster workers’ rights on both sides of the border. The review of USMCA in 2026 would be the perfect venue to have this conversation. But if the trade deal does not survive that long, workers will have to take the initiative on their own.

The views expressed in this article are the author’s own and do not necessarily reflect Al Jazeera’s editorial stance.