Mexico goes much further than tariffs to protect its industry
As Trump threatens, Sheinbaum is unleashing Mexico’s most aggressive protectionist plan in decades.
Someone’s really screwed the pooch. On Mexico’s northern border, the ecosystem of warehouses that supplies apparel to the United States is on the verge of collapse. It’s all down to a blanket government crackdown which has banned them from exporting.
About 30% of the biggest sellers on Shopify, including Alo Yoga and Coach, deliver to the US from these Mexican storage ops. According to Andrés Díaz Bedolla, CEO and founder of Yumari, a platform that connects businesses with suppliers, hundreds of millions of dollars-worth of products are now sitting idle and “the US isn’t going to stop selling for months while Mexico gets its act together,” he told The Mexico Political Economist.
The result has been a run on these distribution centres as apparel companies opt to move their last mile logistics back to the US. “Every five minutes I’m getting a message saying ‘Sorry but I’ve signed with someone else’,” Díaz Bedolla quoted his customers as having told him. “We’re begging them to stay on this side while we sort this issue out.”
Not only will the owners go bust. About 100,000 Mexicans work across this network of warehouses, but, according to businesses and officials from the Mexico’s Economy Secretariat, everyone is blaming anyone but themselves.
Officially, the reason the export ban was applied so widely was that the Mexican government is cracking down on companies using trade tax and tariff waivers, used to incentivise relocation to Mexico. This is why these warehouses are in Mexico in the first place: Garments come from Asia to a US port where they go through customs. They’re then shipped tariff-free to a city like Tijuana, where handling is cheaper, to then be sent to its final customer in the US.
Under this arrangement, every single garment must leave Mexico to avoid paying Mexican tariffs, along with other requirements. Mexican officials claim that these warehouses were caught red handed, but are loth to explain how and why.
By the tone of SE officials that The Mexico Political Economist spoke to, it rather looks like there isn’t a clear explanation for what’s happened. It would seem that authorities have fallen victim, like other world leaders have of late, of a Trumpian contagion of impulsive policy-making.
There is little doubt that the export bans are a direct response to the US president-elect’s threats to impose tariffs on Mexico, which is seen as a back door to Chinese goods. But this mess is also a glimpse into the future. One in which Trump’s economic nationalism backfires spectacularly.
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