I appreciate the California Chamber of Commerce for its invitation to share with you the Mexican perspective on the impact of the new U.S. tariffs on Mexico, on the economy and trade.
For this purpose, allow me to recall some facts:
In January 2025, the United States announced the eventual imposition of tariffs on imports from Mexico and Canada to be set in February. [On March 3], it was announced that from March 4, a 25% tariff will be imposed on products coming from Mexico. This policy aims to pressure Mexico to take stronger actions against undocumented migration and fentanyl trafficking—issues that the Mexican government takes very seriously. However, the economic consequences of this decision will be significant, impacting businesses, consumers and trade relations across North America.
Economic Disruptions and Trade Relations
Imposing a 25% tariff on Mexican imports will create economic and social instability in both countries, disrupting deeply integrated trade relations between the United States and Mexico, as well as in Canada. The North American Free Trade Agreement (NAFTA), launched in 1994, eliminated tariffs and facilitated cross-border trade. In 2020, it was updated to reflect contemporary economic realities by the United States-Mexico-Canada Agreement (USMCA).
The USMCA has strengthened economic ties between the U.S. and Mexico, benefiting multiple industries. In 2024, U.S. imports from Mexico totaled $509.9 billion, while exports reached $334 billion. Tariffs threaten these economic gains, risk violating trade commitments, and could prompt retaliatory measures from Mexico, escalating into a trade war and destabilizing supply chains and economic growth across North America.
Economic Consequences for Mexico
The United States is Mexico’s largest trading partner, with bilateral trade in goods exceeding $800 billion annually. California plays a significant role in this relationship, exporting $33.3 billion in goods to Mexico and importing $61.51 billion in 2023. These numbers make Mexico the most important partner when it comes to foreign trade.
The imposition of tariffs threatens key economic sectors:
- Manufactures: In 2024, Mexico exported nearly $466.6 billion worth of manufactured goods to the United States, with the automotive industry as a major contributor. In California, computer and electronic products constituted $5.8 billion of exports to Mexico in 2023. Tariffs will raise production costs, potentially leading to reduced output, job losses, and lower foreign direct investment (FDI).
- Agriculture: Mexico is a major supplier of avocados, tomatoes, and berries to the United States. Fresh avocado imports from Mexico were valued at nearly $3 billion in 2023. A 25% tariff will reduce price competitiveness, hurting Mexican farmers and leading to higher costs for U.S. consumers, particularly in California, where these products are in high demand.
- Foreign Investment: Mexico attracted $35 billion in FDI in 2024, much of it tied to U.S.-dependent industries, such as manufacturing (automotive, electronics, aerospace), agriculture (avocados, tomatoes, berries) and supply chain logistics. Tariffs will create uncertainty, discouraging investment in these sectors and disrupting cross-border trade and economic growth.
Impact on U.S. Consumers and Businesses
The imposition of tariffs on Mexican imports is poised to have significant repercussions for American consumers and businesses, with California standing to be particularly affected due to its strong trade relationship with Mexico.
As California’s top export market, (accounting for 18.8% of total state exports in 2023) and second-largest import source, Mexico plays a crucial role in the state’s economy.
- Higher Prices: California imported approximately $61.5 billion in goods from Mexico in 2023, including transportation equipment ($14.7 billion), computer and electronic products ($13.5 billion), and agricultural products ($7 billion). A 25% tariff on these imports would escalate production costs, leading to higher prices for consumers.
- Supply Chain Disruptions: California’s economy depends on Mexican manufacturing, particularly in the automotive and electronics sectors. Tariffs could disrupt supply chains, causing production delays, higher operational costs, and potential job losses.
- Inflationary Pressures: Increased import costs will force businesses to either absorb expenses or pass them on to consumers, contributing to inflation. Economists estimate these tariffs could add up to 0.5% to U.S. inflation rates in 2025. For California, where the cost of living is already high, additional inflation could further strain household budgets and overall economic stability.
Threat to USMCA and North American Trade Stability
The United States-Mexico-Canada Agreement (USMCA) was established to strengthen regional economic integration and promote free trade. The imposition of tariffs by the United States risks breaching trade commitments, potentially triggering retaliatory measures from Mexico and Canada. Such actions could escalate tensions, disrupt supply chains, and weaken investor confidence, ultimately hindering economic growth across North America.
As the USMCA undergoes its scheduled review in 2026 — maybe sooner — tariffs could complicate negotiations, eroding trust among the three nations and prompting stricter trade terms or modifications to the agreement.
From our point of view, the proposed tariffs on imports will have clear widespread economic consequences, by straining trade relations, increasing costs for businesses and consumers, and threatening regional economic stability. The uncertain consequences of imposing tariffs could shape the future of North American trade and affect the competitiveness of our countries by offering expensive products due to broken supply chains and facing competition with cheaper products offered by countries from other regions.
Beyond the critical role of tariffs in the negotiations between our countries, and their immediate effects on the supply chain, price increases, and inflation, we must also seriously consider the risk of economic instability in the region. Investments are typically long-term, and investors often avoid instability. The challenges we face today, and the decisions we make, will have repercussions, not only in our nations, but also for the entire region for decades to come.
Mexico, aside from being a neighbor, has been and will continue to be a trustful and strategic partner, serious, and committed to the development of both countries.
Christian Tonatiuh González Jiménez is Mexico’s Consul General in Sacramento.
