If President Donald Trump’s proposed 20 percent tax on Mexican imports is implemented, American shoppers may have to shell out more for a slew of everyday goods – from avocados to flat-screen TVs to cars.
But businesses in the Charlotte region who buy and sell their goods abroad could feel the pang most acutely if such a tariff goes into effect, and subsequently, if Mexico retaliates with its own punitive taxes, experts say.
That’s because Mexico is the Charlotte metro area’s No. 1 exporting destination, accounting for 40 percent of goods exported, or $5.6 billion in 2015, according to data from the U.S. Commerce Department.
Mexico is also the second largest importer behind China to North Carolina, accounting for $4.5 billion worth of goods in 2015.
“Everybody in the international field is scared to death of a trade war. Mexico is going to retaliate,” said Wayne Cooper, chairman of the North Carolina District Export Council.
At issue is a tariff Trump proposed last week, the most specific proposal he has offered as a way to pay for a massive border wall with Mexico that is estimated to cost between $12 billion and $15 billion.
Trump spokesman Sean Spicer has said the president is looking at taxing imports on all countries with which the U.S. has trade deficits – which would also include major partners like China, Germany and Japan. The administration is focusing on Mexico currently.
Mexico – and other counties, if they are faced with such a tariff – could opt to retaliate with harsher taxes on American exports, said John Connaughton, an economist at UNC Charlotte.
“This is something that’s going to have to be thought out really carefully because of the guaranteed retaliation that will take place,” Connaughton said.
For Charlotte, exports have grown 238 percent since 2009, making the metro area, which also includes Gastonia and Concord, the 23rd largest export market in the country, according to Commerce Department data.
Retaliation would mean less profit for exporters, according to a U.S. Commerce Department representative who asked not to be named because he was not authorized to speak on the matter. “That could mean there’s a decrease in the number of manufacturing jobs because manufacturers are not able to export anymore.”
That would be an added blow to North Carolina’s manufacturing industry, which has seen an almost 43 percent drop in employment over the last 20 years, according to Federal Reserve data.
The trickle-down effects on the local economy are complicated since the economies of the U.S. and Mexico are intertwined on manufacturing, Cooper said. North Carolina’s textile industry, for example, relies on chemicals and heavy machinery from Mexico to produce and export goods more efficiently.
Mexican companies are also building in the U.S. to ship abroad. Mexico’s Cemex, for example, is the second-largest cement manufacturer in the country, according to a recent Washington Post story, and it has a regional office in Charlotte.
“If we’re going to buy a wall, we’re going to have the cement (come) from Mexico,” Cooper said.
Less clear is the direct impact of the proposed tax on Charlotte consumers, who some say could wind up spending more on items like groceries.
“Don’t expect all of your prices at Wal-Mart to go up by 20 percent next week,” Connaughton said. He added that the stronger U.S. dollar leaves “some leeway” for the importer to absorb some of the price increase, as will mitigating factors in supply and demand.
GOP leaders have likened Trump’s 20 percent import tax proposal to their proposed “border adjustment tax,” which would tax imports and exempt exports. A number of major retailers, including Charlotte-based Belk, have joined a coalition voicing opposition to such a tax, which they say would trigger higher prices for consumers.
In any case, the Trump proposal has smaller retailers concerned.
Mexico assembles more televisions for export than any other country, according to a recent Wall Street Journal report. That means potentially higher prices on the dozens of brands of high-definition flat-screen TVs at Queen City Audio Video Appliances in Charlotte.
Roddey Player, the company’s owner and CEO, said he is concerned about the proposed tax, which he said could also weigh on the costs of other items he sells, like refrigerators. For small businesses like his, Player said he’d have no choice but to pass the price increase onto shoppers.
“There’s no way a retailer like myself could absorb something like that,” Player said.