Automakers would be the hardest hit, as Ford Motor Co., General Motors Co. and Fiat Chrysler Automobiles NV have assembly plants in Mexico. Several foreign automakers also have Mexican factories that export vehicles to the U.S., including Honda Motor Co. Ltd., Volkswagen AG and Mazda Motor Corp. Other American companies that benefit from Nafta include Whirlpool Corp. and General Electric Co.
“If all imports in the first 11 months of 2016 had been charged a 20 percent duty, U.S. importers would have paid about $54 billion in tariffs, far more than some of the higher estimates for the wall’s cost of $15 billion,” Bloomberg Intelligence analyst Caitlin Webber said in a note Friday.
It’s not just trade, but national pride at stake, for both nations.
‘One-sided Deal’
Before pulling out, Pena Nieto was expected to begin talks in Washington next week on Nafta, which Trump has threatened to abandon if he cannot strike a better bargain for U.S. workers. “It has been a one-sided deal from the beginning,” Trump said Thursday on Twitter.
While the Mexican leader has expressed a willingness to negotiate portions of the agreement, he has remained steadfast in refusing Trump’s demands that his country foot the bill for a border wall.
Trump adviser Kellyanne Conway tried to play down the dispute. "The relationship was not imploded,” she said on Fox News Friday. “This one meeting has been canceled and that was a mutual cancellation.”
Former Mexican President Vicente Fox in an interview with MSNBC disputed that the cancellation was mutual, saying it was Pena Nieto’s decision. He also told CNBC Friday that corporations -- and ultimately American consumers -- will end up paying the 20 percent import duty if the Trump administration goes ahead with the plan.
Trump this week signed a directive to start the process of constructing the wall, saying he would find a way to recoup the cost from Mexico at a later date. White House Press Secretary Sean Spicer on Thursday signaled the U.S. could raise $10 billion a year by slapping a 20 percent tax on Mexican imports, which would “easily pay” for the wall’s construction, he said.
Later, Spicer summoned reporters to his office and said the tax was only one idea to finance the wall, and that its economic impact would have to be examined.
A border tax, which would require congressional approval, would be a clear violation of Nafta, which allows the duty-free movement of goods between Mexico, the U.S. and Canada. Trump could impose 15 percent duties temporarily on Mexican imports, claiming a “balance payments emergency,” but that would fall short of the punishment his press secretary threatened.
Any new tax -- and ultimately a trade war, if it came to that -- would be unpopular with some members of Trump’s own party given the potential to inflict economic damage on both sides of the border. Mexico is among the biggest importers of U.S. agricultural products and assemblers of parts that are used to make American automobiles. Senator Lindsey Graham, a Republican from South Carolina, said on Twitter that “any tariff we can levy they can levy,” calling such a move a “huge barrier” to economic growth.