SALT LAKE CITY — With late news Friday that the Trump administration had reached a deal with Mexico and that tariffs set to go into effect Monday were now on hold, businesses and consumers in the Beehive State can breathe a sigh of relief that they won't face "a $180 million tax increase," as one trade official called it.
The Beehive State imports $3.6 billion in goods from Mexico, which accounts for nearly 25 percent of everything Utah imports each year, according to Miles Hansen, president and CEO of World Trade Center Utah.
"That means that if the administration moves forward with imposing a 5 percent tariff on all Mexican imports, the tariff would equate to a $180 million tax increase on products Utah businesses are importing from Mexico, including motor vehicles, vehicle parts, medical equipment, metal products and food," Hansen said earlier Friday.
President Donald Trump had already issued notice that his administration would impose new tariffs Monday, starting at 5 percent and eventually rising to potentially 25 percent, on goods imported to the United States from Mexico in an effort to put pressure on Mexico to stem the tide of immigrants crossing the border into America. Trump tweeted Friday evening that a deal had been signed and that no tariffs would be imposed.
The strategy of fighting immigration with tariffs has been questioned strongly by critics on the left and the right who worry the policy will harm commerce with one of the nation's largest international trading partners.
Weber State economics professor Jeff Steagall said that while the president purports that tariffs are paid by foreign entities, the truth is the higher cost of doing business is borne by both sides of the commerce equation.
"Pretty much any tax gets paid partly by the producer and partly by the consumer," he explained. When the price of a good is increased due to the tariff, the company paying the tax typically passes that cost onto the consumer.
The company may not hike the price of their goods the entire amount of the tariff, he said, but it would increase the price of those products to at least partially pay for the tariff.
However, there are unintended consequences — eventually the cost of doing business will increase and force companies in both countries to make changes in operations that may include cutting costs, and their workforces, Steagall noted.
"That's going to hurt their bottom line and maybe they're going to have to cut production, cut jobs (and) provide less tax revenue," he said. "That would definitely be a direct impact here in Utah."
The threat of tariffs worried one Salt Lake City shop owner, as well as customers at another market carrying products imported from Mexico. Gilberto Rodriguez, who has owned Campos Market for nearly 10 years, said imposing a tariff on Mexican goods would be especially felt by smaller businesses.
"With smaller shops, it's going to affect a lot of people," Rodriguez said through an interpreter on Friday, before the deal was announced.
Depending on the scale of the tariff, Campos Market may have needed to raise its prices, Rodriguez said, although he added that he would have tried to avoid it by selling more products not imported from Mexico.
Eugenia Lopez, who has regularly shopped at Rancho Market in Salt Lake City with her family for the past five years, said that despite the deal struck Friday, she worried about the prospect of a tariff on Mexican goods resurfacing in the future.
"We are going to pay for that," Lopez said. "Everything is so expensive already, and it's going to be even more expensive. I worry about it, but there's nothing you can do."
Another shopper, Raul Aldama, said he similarly wasn't convinced that a tariff wouldn't be introduced by the Trump administration at some point.
"This whole tariff thing does affect everybody," Aldama said.
A trade conflict could also have boomeranged on the initial goal, the WSU economics professor said.54 comments on this story
"Normally, a smaller country will benefit more from trade than a bigger country," Steagall said. "So if you restrict trade, it's going to hurt the smaller country more than it's going to harm the bigger country."
That would mean fewer jobs opportunities in Mexico, making the incentive to cross the border even stronger for migrants whose economic realities would worsen in a trade war.
In the end, Steagall notes, the impacts of tariffs offer little long-term economic benefit to either country.