Trump's tariffs: What does it mean to be made in America?
CIUDAD JUÁREZ, Mexico – Mexican workers. French employer. Texas landlord. American trucks.
At manager Armando Cadena's factory near the U.S. border, the brake lights his workers build are a result of the globalization – and job exports – President Donald Trump so dislikes. But this plant is also part of the big bet by U.S. automakers to keep their factories in the Midwest competitive and car prices low.
That bet could take a hit Tuesday, when the president's 25% tariff on Mexican imports goes into effect – unless there is a last-minute deal.
“It’s going to have a huge impact,” Cadena said. “At the end of the day, it’s the consumer, you or me, who are going to pay the tariff.”
The president has promised to slap tariffs on countries he says aren’t playing fair with the United States. A tariff is a tax on imported goods, the cost of which is typically passed on to consumers.
Trump said in a news conference earlier this week that "the tariffs are going forward on time, on schedule."
But Cadena's plant, less than a mile from the U.S.-Mexico border, can't be quickly untangled from its spot in the global supply chain.
The factory building is leased by El Paso, Texas-based Tecma Group. A company called Lacroix, headquartered in western France, owns the production lines. With U.S. and Chinese components, Mexican workers build the products: brake lights and control panels destined for General Motors, Ford, Stellantis and Toyota vehicles.
"It’s the system that has made it possible for virtually all Americans to have a smartphone and given us cars that are dramatically better than cars built 40 years ago," said Cullum Clark, director of the Dallas-based Bush Institute-SMU Economic Growth Initiative. “It works."
At the end of the production line on a Friday afternoon in mid-February, Cadena inspected LED taillights glowing white, then red, in a quality testing machine.
This particular set would be sold to a bigger supplier that would then ship the lights and other components to a plant in Fort Wayne, Indiana, where 4,400 American workers build GMC's Sierra truck.
A General Motors spokesperson referred Paste BN to the American Automotive Policy Council, a trade group representing Detroit's "Big Three" automakers. The council has lobbied for Trump's tariffs to exclude cars, trucks and auto parts.
"An integrated supply chain is vital to the success and competitiveness of Ford, GM, and Stellantis, their customers, and the 236,500 Americans employed by these iconic companies," Matt Blunt, the council president, said in a statement.
Last time, tariffs had a swift impact on both sides of the border
Before he took on the role for Lacroix last year, Cadena had managed Mexican assembly plants known as "maquiladoras," for more than three decades. He remembers when Trump threatened tariffs on Mexican goods during his first administration.
In 2019, Trump vowed to impose a 5% tariff that would climb to 25% if Mexico didn't do more to reduce illegal migration and fentanyl trafficking. He made the threat even as the U.S., Mexico and Canada were poised to renew a free-trade agreement his administration had negotiated.
Rather than ship a product whose price could skyrocket overnight, Cadena and other factory managers took the extraordinary measure of holding back millions of dollars in U.S.-bound goods amid the uncertainty.
The domino effect in the United States was swift.
"There were assembly plants that had to pause production because Mexico is a key country for the United States," Cadena said. "A light system we make here in two days might be used there by Ford or General Motors."
In the end, Trump agreed not to impose tariffs after Mexico's then-president Andrés Manuel López Obrador sent his newly created National Guard to the border to crack down on illegal migration and drugs.
But Trump did tack tariffs onto thousands of products imported from other countries, valued around $380 billion and amounting to one of the largest tax increases in decades, according to the nonpartisan Tax Foundation, which advocates for policies that drive economic growth.
The Biden administration kept many of those tariffs in place.
Facing Trump's current threat, Mexico President Claudia Sheinbaum Pardo mimicked her predecessor's response, promising to send 10,000 National Guard troops to the border. The move was enough for Trump to put tariffs on hold for 30 days, a timetable that ends March 4.
Tariffs used selectively can be beneficial, said Jon Barela, executive director of the Borderplex Alliance, which promotes economic development in El Paso, Texas; Ciudad Juárez, Mexico; and southern New Mexico.
"But tariffs used to punish our allies and friends are foolhardy," Barela said. "I hope this will be a rerun of Trump 1.0 when threats were made and that threat evolved into this great trade deal, the U.S.-Mexico-Canada Agreement," which remains in effect and ensures zero tariffs on most products moving across North America.
Made in (North) America
This tristate region between Texas, New Mexico and northern Mexico, known as the Paso del Norte, or the pass of the north, lies in a valley of the Rio Grande between a break in the high desert mountains. The steel U.S. border fence cuts through urban sprawl, running east-west along the river channel.
Negative portrayals of the southern border are common, as in the president's executive order describing the region as "overrun by cartels, criminal gangs, known terrorists, human traffickers, smugglers, unvetted military-age males from foreign adversaries and illicit narcotics that harm Americans."
But this region has also played host to an economic transformation over the past 25 years that has interlaced the U.S., Canadian and Mexican economies in a way that lets North America compete with China, experts say.
Some 300 factories in Ciudad Juárez make and assemble products that often crisscross the border multiple times, as value is added on each side. Mexican truckers deliver goods to warehouses in El Paso and Santa Teresa, New Mexico, where they're loaded onto U.S. trucks and rail cars for shipment across the country.
"If we do this (with tariffs), who are we going to hurt most?" asked Jerry Pacheco, president of the International Border Association in southern New Mexico. "It’s not a black-and-white issue."
Many products crisscross the border multiple times, and an "import" from Mexico may include parts produced in the United States, effectively taxing a product partially made in America.
"By whacking the entire product 25%, you might whack a 70% American-made product," Pacheco said.
Lacroix manufactures goods at two plants in Ciudad Juárez, including the brake lights, panels that control vehicle air conditioning and dash lighting – valued at roughly $10 million to $15 million monthly, Cadena said.
The company relies on a local workforce with years of electronics manufacturing experience and the plant's close proximity to the U.S. border.
Factory wages in Mexico are a fraction of what they are in the U.S. Along Mexico's northern border, the minimum wage is 50% higher than in the rest of the country, but workers still earn roughly $2.62 per hour, or roughly $21 per day, at the current exchange rate.
A 25% tariff could raise costs between $2.5 million to $3.75 million per month, he said.
"We can't ship our products absorbing all those costs," Cadena said. "We'll have to immediately adjust prices."
The Texas-based Perryman Group, which provides economic analysis, estimates that sustained tariffs on Mexico could cost the United States 1.1 million jobs, when multiplier effects are considered. Tariffs could also push inflation higher, particularly on food, electronics and vehicles imported from Mexico, according to the report.
If a blanket 25% tariff goes into effect, "that would mean that every Suburban, every Denali, every Audi, VW, Jeep, every appliance, every washer, dryer, refrigerator and fresh produce would immediately go up in cost 25%," said Alan Russell, chief executive of Tecma Group, which handles real estate and other services for companies to manufacture in Mexico, including for Lacroix.
That's why Russell thinks the tariffs are likely to be reduced, postponed or scrapped.
"Trump is a smart guy," Russell said. "The people around him are smart. They obviously know that we can’t live without Mexico."
Lauren Villagran can be reached at lvillagran@usatoday.com.