In recent weeks, there is no more media issue than famous tariffs. The great economic power of the world has decided to undertake a kind of commercial war, raising tariffs at right hand and sinister with the supposed intention of returning greatness to its economy. However, this measure deserves a deep analysis, as it will mark the economic agenda during this year.
Tariffs are instruments that governments use for two main reasons. First, as protection of a specific industry, more expensive imports to encourage the consumption of national products. This strategy can be effective in developing economies that seek to strengthen certain sectors. Second, as a coercion tool against its main business partners. In this context, tariffs become a currency to negotiate political and economic agreements.
President Donald Trump has implemented two types of tariffs aimed at the Mexican economy. One, linked to migratory agreements and the fight against organized crime, with a 25% tariff on Mexican exports. The other, also 25%, focused on aluminum and steel, mainly impacting Canada, Brazil and Mexico, the largest exporters of these inputs to the United States. In response to the first tariffs, the Mexican government decided not to apply reciprocal measures, which, according to some studies, was successful, since it avoided a greater contraction in GDP growth. Instead of losing 3% of GDP, it is estimated that the affectation will be only one percentage point. Even so, considering that the projected growth for this year is between 1.5% and 2%, this reduction could leave the Mexican economy with practically null growth, similar to the first year of the government of Andrés Manuel López Obrador.
The impact is not limited to economic growth, but also affects the labor market. Reports estimate that up to two million jobs could be lost, which aggravates the structural deficit of employment in the country. Mexico needs to generate 1.2 million new jobs a year, but currently only 200,000 are created, which means that unemployment could significantly increase in the coming months.
As for aluminum and steel tariffs, it is important to remember that these materials are fundamental intermediate goods for key sectors such as construction and automotive industry. More inputs will affect production both in Mexico and the United States. In addition, Mexico exports basic steel to the United States, where it undergoes special treatment before being reimported for use in strategic sectors such as automotive and aerospace. This double increase will imply a final cost of almost 60% in finished products.
What the president of the United States is doing is nothing more than a political decision with which he seeks to press other economies. However, if the rest of the world does not yield and tariff measures intensify, it is likely that the US economy also suffers significant consequences with global impact. For Mexico, the best strategy to face this type of attack is to strengthen its productive structure and travel towards an economy more based on innovation and services. Despite having natural resources and specialized labor, the country has not yet achieved this transformation due to a lag in innovation and research.
The key is, in the first place, in betting on education, but it was decided to put an impressionable at the head of that sector, so I doubt that something is achieved in the short term and second, we must improve the levels of competitiveness , understanding that innovation in productive processes is the fundamental pillar to boost economic development and minimize the impact of external protectionist policies, innovation that requires investment, which in turn is complicated by the constant destruction of the rule of law by law by of the ruling.
The near future, does not look beautiful or politically, or in people’s pocket.
*The author is an academic of the School of Government and Economics and the School of Communication of the Pan -American University, expert consultant on economic, financial and government issues, general director and founder of the site El Commentary of the Day and conductor holding the program of Analysis: University voices.
Contact and networks: https://eduardolopezchavez.mx/redes
