Tariffs: A Perspective from Mexico

Never slow off the mark, my colleague Cinthia Nazario Martin offers us insight.

What are your ideas, thoughts, and vision regarding the management of trade and contracts in Mexico as a result of the new tariffs from the United States?

Interviewee: Matias Nazario Morales
Position: Coordinator of Advisors to the National Leader of the National Union of Education Workers (Sindicato Nacional de Trabajadores de la Educación)

First of all, if the 25% tariffs on companies exporting to the U.S. impact Mexico, they will also have some effect on the U.S. Additionally, Mexico will face challenges due to currency depreciation and a decline in remittances sent by Mexicans living in the U.S., as these will also be subject to higher taxes.

The tariffs will also affect trust in cooperation efforts to combat organized crime. President Trump frequently highlights fentanyl trafficking, which originates in China, with Mexico and Canada serving as key entry points for this substance.

Contracts will need to be reviewed, and I believe this uncertainty will create a niche for new opportunities. However, I see the tariff issue as temporary—opening multiple trade disputes simultaneously is complex. The U.S. is simultaneously challenging China, Canada, and Mexico, while also distancing itself from Europe, which will have consequences. That said, I maintain that even in this crisis, there is room for opportunity.

Additionally, Mexico’s legal framework will undergo changes starting June 1, with a new judicial system and updates to the regulatory framework.

Questions:

1. How is this a niche opportunity?
During crises, many contracts are canceled, but with the update of Mexico’s legal framework, new opportunities will emerge. There will be more trade, more work, and new contracts, which can create further opportunities.

2. What do you mean by a new regulatory framework?
The legal reforms will introduce new ways of applying and interpreting the law. This is partly due to the renewal of 50% of judges, magistrates, and ministers, which will lead to new legal criteria.

3. How will the temporary nature of the tariffs affect trade and contracts?
The U.S. has engaged in multiple trade disputes, and it is unlikely they can sustain all of them for long. Eventually, they will have to reverse or adjust their position due to the practical limitations of confronting multiple economic partners simultaneously.

Conclusion:

The recent implementation of 25% tariffs by the United States on Mexican exports presents both challenges and opportunities for Mexico. While the tariffs may lead to currency depreciation and reduced remittances from Mexicans in the U.S., they also create potential for new business opportunities due to the uncertainty in trade and contracts. The relationship between Mexico and the U.S. could be strained, particularly in areas of cooperation such as the fight against organized crime, especially regarding fentanyl trafficking. However, these challenges may be temporary, as the U.S. faces difficulties managing multiple trade disputes, which could lead to a policy reversal.

Additionally, Mexico is undergoing significant legal reforms, including an overhaul of its judiciary and updates to its regulatory framework. These changes, set to take effect in June, will open up new opportunities for business and trade while also potentially shifting the interpretation and application of the law. In times of crisis, such legal and regulatory updates can create new avenues for growth and cooperation.