In the Mexican border city of Ciudad Juárez, many companies produce primarily for the US market. Recently they have laid off thousands. This is mainly due to US President Trump’s tariff policy.
The sun has not yet risen over the desert when the first job seekers have already arrived at a huge parking lot in Ciudad Juárez. Alma, who does not want to give her last name, has been unemployed for a month: “There used to be a lot of work, but demand has fallen sharply.” She has no savings or unemployment insurance, like hardly any of the so-called “jornaleros”, day laborers who hope to find a job here. Her boyfriend is currently paying the rent.
When the stalls open at seven in the morning, long queues have already formed. A mediator shouts: “Come here, come to us, we also take people with no experience, no certificates, but with a desire to work.” It’s an empty promise, they can’t offer many jobs. While months ago the large space was crowded with vendors, today there are only four. Many so-called maquilas, manufacturing companies specializing in exports that are so important for the border region, have closed, says job broker Gilberto Sandoval: “Just six months ago I was giving away 500 jobs every week, now no more than 20, maybe 30.” He feels bad turning most of them away.
50 percent tariffs on aluminum and steel
According to Mexico’s statistics office, 14,000 jobs were lost in Juárez in the first six months of this year alone. Maquilas specializing in electronics, metal processing and auto parts suppliers have been particularly hard hit. Some companies have had to close, the auto parts manufacturer Lear Corp has moved parts of its production to Honduras, and the electronics manufacturer Lacroix also wants to withdraw. The region’s industry associations warn that 30 percent of maquila companies are facing enormous difficulties.
One of them is Thor Salayandia, president of a regional business association and himself an entrepreneur in metal processing. He had to reduce his workforce from 80 to just 20 employees. Its aluminum and steel products are already subject to 50 percent tariffs. And that has drastic consequences: “I have a customer in Houston and I made him an offer for $20,000. In July I had to call him again: Sorry, because of the new tariffs I have to add $10,000. He said: Then I can buy here in Houston, it costs the same.” The customer was gone.
Unpredictable customs policy just one factor
The tariff threats and regulations are constantly changing: In March, 25 percent tariffs were suddenly imposed on goods from Mexico to the USA, and later Trump threatened 30 percent. Mexican President Claudia Sheinbaum has been able to avert this so far, but a 90-day deadline expires at the end of the month and there is a threat of new import tariffs in the USA.
Salayandia and other business owners see the Trump administration’s erratic tariff policy as just the final straw that broke the camel’s back. Other factors had already caused the economy to falter, explains economist Alejandro Brugués from the Colegio de la Frontera Norte in Juárez. “We see that many raw materials from China and Southeast Asia are becoming more expensive due to all the global changes.” The supply chains would also suffer from the rising costs of materials and energy. There would also be competition from cheaper Chinese imports.
Justice reform would deter investors
Manuel Sotelo Suárez, President of the Transport Companies Association of Ciudad Juárez, sees another reason in the judicial reform in Mexico, which has been in effect for a year. Since then, judges have been able to be elected directly by the people. “This caused a major loss of confidence among investors,” says Sotelo. Many experts share the concern: a direct election could encourage corruption and influence from organized crime.
Cartels play a central role in Juárez: This is where the smuggling routes for weapons, drugs and people lead, making the city one of the most dangerous in the world. Local associations fear that organized crime will benefit from the lack of jobs and prospects, because people in need are more susceptible to their offers.
Free trade agreement does not protect against special tariffs
The free trade agreement between Canada, the USA and Mexico, the USMCA, called T-MEC in Mexico, was actually supposed to protect against all these fluctuations and uncertainties. However, the agreement does not prevent special tariffs, explains economist Brugués. And: Many products have to meet strict requirements in order to achieve duty-free status.
The free trade agreement is to be redrafted next year; negotiations have just begun. “During the negotiations, we must ensure that tariffs on aluminum, steel and other raw materials are abolished or reduced,” says Brugués. Among other things, the USA is exerting pressure with massive tariffs to achieve better conditions for these negotiations.
The entrepreneurs in Ciudad Juárez hope that the new tariffs in November will bring planning security and thus more stability and calm to the market, at least until the new T-MEC is completed.
