U.S. President Donald Trump recently threatened to impose tariffs on Mexican imports very soon if the border issue isn't resolved. Trump further heightened fears among auto investors after he tweeted last week that tariffs could possibly be hiked to 25 percent in the long run.
Many analysts believe that the auto sector in Mexico will suffer the most as a result of tariffs.
According to CNN, Mexican car imports last year reached 2.7 million, indicating the country's high sales dependence on the U.S. market.
Fitch Ratings Chief Economist Brian Coulton believes that the vehicle sector, in particular, is vulnerable to negative impacts brought about by potential tariffs since global demand is slowly weakening.
The U.S. is also a massive ally of Mexico in terms of auto parts. Trade data from the White House revealed that Mexican auto part imports reached $59.4 billion in 2018.
According to industry experts, this could mean that tariffs on auto parts and vehicles could be an added costs automakers and investors are not ready to face.
"The threat of tariffs on Mexico was completely off the market's radar. No one has been talking about tariffs on Mexico," Director of Investments at Cornerstone Wealth Group, Cliff Hodge, said of the issue.
Following Trump's Thursday tweet, multiple global stock indexes dropped, including S&P, Nasdaq, and Dow. Investors were apparently shaken over the news, economists pointed out.
Aside from the auto sector, there are other industries that could well be impacted by Trump tariffs. While the American president has yet to give the green light, many sectors are starting to panic.
Amid the stock market chaos and auto sector shaking, U.S. and Mexican delegations are expected to meet today to discuss the matter. According to CBS News, U.S. Commerce Secretary Wilbur Ross will meet with Mexico's Economy Minister Graciela Marquez on Monday.
On Wednesday, another meeting will be held between Mexican and American government heads. However, Trump will not be around for the meetings as he is scheduled for a three-day state visit to the United Kingdom.
Some Republicans have expressed doubts about potential tariffs on Mexican imports. They said American markets and consumers will most likely be affected as well, not to mention the economy.
On Sunday, Trump tweeted about the border issue that has been a problem for both sides for many years. He said that while a delegation is expected to arrive in Washington for border talks, the White House wants "action, not talk."
Business leaders have also rallied to take a stand against Trump's threats. Many of them agreed that the tax duties will be detrimental to businesses in the United States, not just those in Mexico.
