The entry into force of the 25 percent tariff on products exported from Mexico to the United States represents a significant blow to the economy of Jalisco, since eight out of ten products exported from the state are destined for the neighboring country. However, the lack of substitute products in the U.S. market can play in favor of the local economy.
In an interview with Telediario, Eduardo Díaz Gavito, vice president of Customs and Trade Facilitation of the International Chamber of Commerce, explained that the imposition of tariffs reduces the competitiveness of Mexican products, but as long as there is no replacement for them, it is possible to maintain preference in the U.S. market despite the increase. “As long as we do not have a substitute product in the United States, I think it will be more complicated, and I think about avocados. If the American consumer likes to consume avocados, it will be more complicated to replace them with one from another country,” he explained.
How much avocado is exported to the United States?
Currently, only Jalisco and Michoacán are authorized to export the fruit from Mexico to that country, which in the last three years has increased its imports by up to 24 percent. Jalisco produces about 350 thousand tons of avocado annually, of which 120 thousand go to the U.S. market.
The outlook may be different for other goods, such as tequila, “for those who consume tequila, because there is only tequila in Mexico, it will cost more, unless of course tomorrow someone says ‘I really like tequila, but I’d rather drink Kentucky bourbon because it’s cheaper,’ then of course, it immediately hits the American’s pocket.” Recently, the Tequila Regulatory Council announced that last January exports of the drink increased by 29.3 percent, and the northern country is the main buyer, destination of 86 percent of the liters purchased abroad.
For the business representative, although there will be an economic impact for Mexicans, Americans will also feel the blow of the tariffs. “Importers from the United States will pay these taxes when the lemons, beer, tequila, avocado, cars arrive there (…) immediately the cost for them increases by 125 percent, which obviously makes no economic sense, but it is the decision they have made so far.”
How big are Jalisco’s exports?
According to information from INEGI, in the third quarter of 2024, Jalisco exported 7,341.5 million dollars, an increase of 3 percent compared to the same period in 2023, with 7,124.7 million dollars. Until September of last year, the total amount amounted to 21,415.85 million dollars.
Data from the Mexican government reveal that 7.81 percent of Mexico’s international sales to the United States originate in Jalisco, with an approximate value of 2,771 million dollars; surpassed by Baja California, which contributes 12.1 percent, with 4,312 million dollars; Nuevo Leon, 13.9 percent, for 4,930 million dollars; Chihuahua, 17.2 percent, with 6,110 million dollars; and Mexico City, 18.8 percent, with 6,667 million dollars.
What sectors are the main exporters?
The main export subsector of Jalisco is the manufacture of computer, communication, measurement and other electronic equipment, components and accessories, which represents 49.8 percent of the state’s total exports. The trend is reflected in exports to the United States, destination of 18.9 percent of purchases of machines and data processing units; as well as 17.3 percent of machine parts and accessories; and 11.1 percent of telephones, including mobile phones and other wireless networks.
For industries established in the country, the outlook is complicated: “The American automakers have been working in Mexico for years and have their production plans in Mexico. It is not so easy to say ‘well, starting tomorrow we will continue making the new pickup truck in Detroit’, because production, business and supply plans take months, if not years, to be able to transform and transfer them somewhere else, so this is a direct impact on the pockets of Americans.”
Díaz Gavito acknowledged that the national economy depends largely on the United States, and can affect the exchange rate and inflation, so the application of tariffs will represent a blow to the economy of the region, and called for respect for the rules of international trade and the free trade agreements signed, “we must return to a trade based on rules for security and confidence for the benefit of businesses and consumers,” he concluded.
Source: milenio
