From avocados to beer: 5 areas taking a hit if Trump closes southern border

Source: The Hill | April 2, 2019 | Rafael Bernal

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Workers and consumers in the U.S. would immediately feel the impact of a border freeze, particularly in these five areas:

Automotive

The automotive industry illustrates the co-dependency of North American economies more than any other sector.

American car manufacturers make parts in the United States, Canada and Mexico that are integrated through complex supply chains for final assembly in plants all over the continent.

Auto industry experts estimate some parts cross North American borders eight times before they’re completed and added to a final product.

“The entire NAFTA agreement could be about cars,” said Enrique Perret, director of the U.S.-Mexico foundation.

According to the Observatory for Economic Complexity (OEC), an MIT project, the United States imported $85 billion worth of transportation equipment from Mexico in 2017, while exporting $20.9 billion worth.

“It would hit the industry hard, not necessarily the consumer [in the short term],” explained Perret, a former North America director of Promexico, Mexico’s former trade promotion authority.

A large part of automotive trade in North America is executed through intra-company purchases — for instance, General Motors in Detroit purchasing parts or cars from General Motors Mexico. In a border slowdown, production lines throughout the continent would be forced to adjust to the slower movement of parts from one country to the next.

Beer

Unlike with autos, a slowdown in the movement of perishables and consumer goods would hit the consumer almost immediately.

Mexico’s beer industry is mostly owned by the world’s two largest breweries, the Dutch Heineken and Belgian Anheuser-Bush InBev.

The two international giants have concentrated beer production in Mexico, leaving local brands like Corona and Dos Equis in their original plants, but also adding production of Old World classics like Heineken.

“Mexico is the world’s biggest producer of beer and the world’s largest exporter of beer,” said Perret.

At $3.32B in 2017, Mexican beer imports are minuscule compared to the auto industry or other manufactured goods, but they reach a wider swath of U.S. consumers.

And a border slowdown would much more quickly be reflected in higher prices or lesser availability of beer on store shelves.

Manufactured goods

From flat-screen TVs to jet engines, Mexico’s manufacturers put together thousands of American parts into finished goods.

Machines of all sorts make up 40 percent of all imports from Mexico, accounting for $123 billion in 2017; that year, the United States exported $44.6 billion of machinery, a quarter of all exports to Mexico.

Like the auto industry, machine manufacturing depends on supply chains that span across North American borders.

Manufacturing hubs that straddle the border itself would be hardest hit, as its logistical chains depend on the movement of people and goods across binational cities, like El Paso and Ciudad Juarez.

“We are the 4th largest manufacturing hub in North America,” said Jon Barela, CEO of the Borderplex Alliance, a non-profit business organization serving El Paso, Ciudad Juarez and Las Cruces, New Mexico.

“Virtually every sector, every business would see an adverse impact,” added Barela, “whether it’s retail logistics or manufacturing.”

Avocados

As with beer, consumers of Mexican produce would quickly feel a border shutdown.

Perishables held at ports of entry could quickly spoil, ruining entire crops and disrupting supply lines and logistics for upcoming crops.

Multiple outlets have reported that American consumption of avocados so far outweighs production that prices and availability would be hit in a few weeks.

Some Mexican produce could be replaced with American goods.

South Florida’s tomato producers, for instance, say Mexican producers have been dumping their product on the United States, unfairly lowering prices.

But Rep. Donna Shalala (D-Fla.) says the widespread impacts of a border shutdown would end up hurting American producers, even Florida’s tomato farmers.

“[Trump’s] causing an economic hardship for the whole country. It’s the economic implications of what he’s doing. And would it help South Florida farmers? Sure, yeah, in the short term, for a short period of time. But he’s talking about turning it off and turning it on and that’s not the way you do business,” said Shalala.

In the event of a border closure, Mexico is likely to retaliate with trade restrictions on different sectors, said Perret.

Mexico’s strategy in previous trade disputes has been to deploy what they call the “carousel.”

In the carousel, Mexican authorities will impose restrictions on different American goods for short periods of time, enough to disrupt the industry in the United States, but aiming not to severely affect Mexican consumers.

Mexico’s strategy is to target products in key congressional districts, so “members of Congress will be nervous that it’ll be their product’s turn,” said Perret. 

The border

The hardest hit economic sector in any border slowdown is the regional economy of the border, much of which depends on relatively free movement of people, capital and goods.

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