Trump’s New Threat: Tariffs on all Imports from Mexico

On May 30, 2019, President Trump announced if Mexico does not stop migration to his satisfaction, he will begin imposing tariffs on imports into the United States from Mexico.  If Mexico’s response is not sufficient, the White House will begin increasing tariffs by 5% each month starting June 10, 2019.  If this announcement goes into effect, the additional 5% rate will occur on the first of each month from July 1, 2019 through October 1, 2019 reaching an additional 25% duty rate.

Tariff Schedule

The following tariffs will most likely be in addition to existing duty rates including NAFTA qualifying goods.

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Why the beef with Mexico ?

President Trump is seeking Mexico’s assistance to block migrants from crossing U.S.-Mexico borders.  Originally, President Trump threatened to shut down the border between Mexico and the United States in April 2019.  This threat was based on the increasing number of migrants coming into the United States illegally, up to 4,200 per day, which would total over 1.5 million migrants per year if migration continues at the same pace.  In response, U.S. Customs and Border Protection started hosting public calls once per week to update the community with facts about the situation.

Can Trump Impose Tariffs Based on this?

Technically, yes.  President Trump has invoked the International Emergency Economic Powers Act of 1977 (IEEPA), which authorizes the President to regulate commerce after declaring a national emergency in response to any unusual and extraordinary threat to the United States which has a foreign source.  In this case, he considers the migration issue to be just that.  No other president in the past has invoked the IEEPA to impose tariffs, only to freeze or block assets of foreign governments or nationals.  In fact, Daniel Ujczo with Dickinson Wright, states “The emergency may be terminated by the President, by a privileged joint resolution of Congress, or automatically if the President does not publish in the Federal Register and transmit to Congress a notice stating that such emergency is to continue in effect after such anniversary.  However, to date, Congress has never attempted to terminate a national emergency invoked by any President.  Read more about IEEPA considerations and the next steps.

USA Mexico Border

How will this affect USMCA passing Congress?

Daniel Ujczo of Dickinson Wright states,

“Other than IEEPA violating the spirit of USMCA, the new agreement is of little use in the IEEPA context.”

He goes on to state, “The IEEPA announcement surprisingly came on a day that witnessed momentum building on USMCA with a US Vice Presidential-Prime Minister of Canada meeting following Canada’s introduction of legislation to ratify the USMCA, Mexico’s President calling for an extraordinary session of the Mexico’s Senate to be held this summer to ratify USMCA, and the White House pressing forward with procedural mechanisms (i.e., the filing of the final text of USMCA and the Statement of Administrative Action) to ensure all timing hurdles would be clear should the US House of Representative desire to consider the USMCA implementing legislation in mid-July 2019.”

“The White House was quick to emphasize that the IEEPA and USMCA were on different tracks; however, it is difficult to envision a scenario where Mexico or the US Congress will advance USMCA legislation with IEEPA tariffs in place.  USMCA was already facing a tight timing window to achieve ratification in Summer 2019 (pre-2020 election season), the likely delays that will follow in the wake of IEEPA tariffs will require Avengers-like ability to transcend space and time.”

USMCA may be on hold until this issue is resolved.

What should we do next?

Scarbrough will continue to monitor the situation.  If you have concerns and need to talk to our consulting team, we are offering a free 20-minute consultation to any importer that may be affected by IEEPA, Section 232, or Section 301 tariffs already in effect.

Contact Us Now.

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