La Jornada: Tariffs for forced labor do not affect the country: BBVA

The new tariffs that the United States imposed on Mexican exports represent a possible violation of the T-MEC, but their impact on the Mexican economy will be limited, reveals a BBVA analysis.

To combat the entry of products manufactured with forced labor and strengthen the Trump administration’s trade policy, the Office of the United States Trade Representative (USTR) announced on Thursday the application of tariffs on various goods from multiple countries, including Mexico. The tariffs consist of an additional charge of 10 percent for goods from several nations, while for others it will be 12.5 percent.

Based on section 301 of the United States Trade Act of 1974, the USTR concluded that, although Mexico has established measures to prohibit the importation of goods produced with forced labor, these have not been effectively enforced. Consequently, Mexican products will pay a 10 percent tariff.

However, “the resolution includes an exemption for products from Mexico that fall under the USMCA. For Mexico, the direct impact seems limited because most of the goods that comply with the USMCA rules will retain the exemption.”

BBVA analysts commented that this allows the country to maintain a better relative position compared to competitors subject to 10 percent or 12.5 percent.

“This differentiated treatment for Mexico (and Canada) reinforces two signals. First, the USMCA continues to function as the main mechanism to protect Mexico’s preferential access to the US market and it is a new action that reveals the United States’ intention to continue with the USMCA.”

“Second, the incentive remains to raise the regional content of exports and adequately document their compliance with the rules of origin,” they noted.

BBVA insisted that “the resolution is favorable for Mexico in relative terms, but negative for the predictability of global trade, which is why it will cause inefficiencies in various economies, including the United States. American consumers will end up paying a portion of these tariffs.