I was recently asked by two large companies with manufacturing operations in Mexico whether I thought that Mexico would be the victim of the United States’ “beggar thy neighbor” protectionism.
Everyone seems to be playing a game of “will he, or won’t he,” which plays perfectly into a strategy that seeks to inject uncertainty into the trade relationship. Keeping everyone guessing increases the cost of doing business with Mexico (and Canada and China, etc.), which is what the current U.S. president wants.
According to the Wall Street Journal, “some companies, including networking-equipment company Cisco Systems, fashion company Tapestry and clog and sandal company Crocs, have included the impact of tariffs in their latest guidance. Others, including Mexican-inspired restaurant company Chipotle Mexican Grill, consumer-products maker Clorox and cereal maker WK Kellogg have excluded it.”
My advice is to ignore the tariffs. If they do come to pass, the market will be shocked out of its complacency and will correct on three fronts.
First, the peso will devalue, thereby negating much of the impact of the increased costs.
Second, the stock market will send a signal that it never expected the government to shoot American competitiveness in the foot.
Third, the move will immediately impact inflationary expectations (which are already at their highest level since the pandemic), thereby making the cost of borrowing more expensive. That means higher costs for mortgages and higher costs for the federal government to service its gargantuan debt. Faced with this reality, it is unlikely that tariffs, if imposed, will last.
In terms of actual economic impact on Mexican-based manufacturers, companies will have part of their cost absorbed by devaluation and the rest will be borne by their clients and, ultimately, the consumer. When there is full employment, companies have pricing power, which the current crop of CEOs remembers well, having raised prices during the supply chain crisis of the pandemic. Even companies that weren’t affected took advantage of the opportunity to both make their wares more expensive and to impose “shrinkflation” on their customers (i.e. you now get 8 units for the price of 10).
Protectionism makes everyone worse off, particularly in a trade relationship like that between Mexico and the United States. The two countries make stuff together, such that for every dollar the US imports from Mexico, fully 40 cents is American-made content (the figure for China is only 4 pennies).
But a strange fetish for tariffs has captured the imagination of the man Americans elected to lead them. Ignoring the lessons of history, especially the Smoot-Hawley tariffs that plunged the U.S. into the Depression in the 1930s, President Trump thinks that Americans can somehow benefit from everything being more expensive and scarcer.
Reality will force the system to self-correct. In the meantime, the best advice is the old British admonition to “keep calm and carry on.”
Agustín Barrios Gómez is a founding partner of International Capital Partners, a former Mexican Congressman, and a member of the Mexican Council on Foreign Relations (COMEXI).
Great comments and perspective
I’m not sure Trump/Musk is smart enough to value lessons of history. Tariffs have never been successful in the past.
Leftists are big on equity, so how about equitable tariffs?
Actually the US Constitution is “Big on Equity”– does the phrase All men are created equal ring any bells? But then again the people who wrote those words you’d call Leftists. Gotta keep making those nasty Leftists wrong, eh?
How about trump and the US live up to the USMCA trade agreement NEGOTIATED BY THE FIRST TRUMP ADMINISTRATION?
If the US is getting the short end of the stick in trade relationships with Mexico and Canada (which it’s not) it could only be because trump screwed up “the deal.” Is that what happened, “truth”?
Opinion Comment: The “America First Investment Policy” is the Real Story—Not the Tariff Distraction,
This article, while engaging and well-argued, focuses too much on the short-term uncertainty of tariffs and fails to recognize the larger economic shift driving U.S. trade policy. The author presents tariffs as a temporary negotiating tactic that should be ignored, assuming the market will correct itself through peso devaluation, inflationary pressures, and stock market reactions. However, this perspective overlooks the bigger picture—the “America First Investment Policy” (AFIP), announced on February 21, is the real driving force behind these trade shifts.
The tariffs were postponed—not canceled—because they are now part of a much broader economic strategy. Instead of debating the likelihood of tariffs, the real discussion should be about the AFIP and how it is shaping the future of U.S.-Mexico trade relations.
1) The Tariffs Are a Byproduct of a Larger Economic Strategy
The article assumes that Trump’s tariff threats are just short-term political theater and that the market will correct itself if they happen. But this view ignores that tariffs are now a tool within a much larger U.S. investment and industrial policy shift:
The “America First Investment Policy” (AFIP) was introduced on February 21.
The policy prioritizes U.S. economic interests by encouraging investment from allies while restricting foreign adversaries, especially China.
It expands the Committee on Foreign Investment in the United States (CFIUS) to review and block strategic foreign investments.
It streamlines investment from U.S. partners while making it harder for companies to rely on foreign supply chains.
Tariffs are now a structural part of this investment shift, not just a negotiating tactic.
Unlike previous trade disputes, these tariffs are aligned with a broader industrial policy that seeks to reshore manufacturing and strengthen U.S. supply chains.
The pause on tariffs allowed time to introduce AFIP, meaning that once the investment rules are in place, tariffs may be implemented as part of a longer-term strategy rather than just a short-term shock tactic.
✔ Key Takeaway: This article misreads the situation by treating tariffs as isolated events. In reality, tariffs are now embedded in a broader U.S. policy that will shape North American trade for years to come.
2) “Ignore the Tariffs” Is a Risky and Misleading Conclusion
The article’s central argument—that companies should ignore the tariffs because they won’t last long—is not supported by recent policy moves:
Peso Devaluation Will Not Fully Offset the Tariff Impact
The author argues that a weaker peso will absorb much of the cost of tariffs—but this only works to a limited extent.
Many auto and manufacturing contracts are in USD, meaning Mexican exporters cannot simply “pass the cost along” without losing competitiveness.
If the U.S. begins favoring domestic suppliers under AFIP, peso devaluation won’t help companies that lose contracts altogether.
Comparisons to Past Tariffs Ignore Today’s Geopolitical Context
The article references Smoot-Hawley tariffs from the 1930s, implying that the market will “self-correct” as it did in past protectionist eras.
This ignores the key difference—today’s trade policy is not just about tariffs but about fundamentally reshaping investment flows, manufacturing priorities, and supply chains.
The U.S. is no longer just raising prices with tariffs—it is restructuring trade partnerships to favor domestic production.
✔ Key Takeaway: The assumption that “tariffs won’t last long” is flawed because it ignores the broader shift under AFIP. Unlike past tariff disputes, today’s changes are part of a permanent industrial policy realignment.
3) The Real Question: How Will Mexico Respond to AFIP?
Instead of dismissing tariffs, the article could explore how Mexico will respond to the larger strategic challenge posed by AFIP:
Will Mexico Introduce Countermeasures?
Will Mexico implement new trade policies to keep investment flowing?
Could Mexico offer its own incentives to retain foreign manufacturers?
How Will Mexican-Based Companies Like Nemak Adapt?
If tariffs and reshoring incentives push companies toward the U.S., how will major manufacturers respond?
Could we see new regional trade alliances that bypass U.S. restrictions?
Does Mexico Need Its Own “Investment Policy” to Counter AFIP?
The U.S. is restricting certain foreign investments under AFIP—could Mexico respond by offering special economic zones or tax advantages to keep businesses?
Should Mexico align more closely with China or the EU to counterbalance the U.S. strategy?
✔ Key Takeaway: Mexico is now at a crossroads. Instead of debating whether tariffs will happen, the focus should be on how Mexico will respond to the structural trade shift created by AFIP.
4) What the Article Could Have Explored Further
While the article provides a contrarian take on tariff fears, it fails to explore the long-term economic strategy behind recent U.S. moves. Future reporting could:
✔ Address how AFIP makes tariffs more than just short-term political threats.
✔ Examine how AFIP will change trade and investment flows, not just pricing.
✔ Analyze how Mexico can respond with countermeasures to protect its industries.
✔ Explore how this shift affects supply chains beyond just Mexico—will Canada, Europe, or China benefit from these policies?
The real story is not the tariffs—it’s the U.S. investment realignment under AFIP. Any company operating in Mexico cannot afford to “ignore” these changes because they are not temporary disruptions—they are permanent shifts in how trade will be conducted.
Final Thoughts: The Bigger Picture
This article takes an overly optimistic view of tariffs as temporary distractions, when in reality, they are part of a fundamental restructuring of U.S. trade and investment priorities.
By ignoring the broader implications of AFIP, the author underestimates the long-term consequences for Mexican manufacturers, trade agreements, and the North American supply chain.
Rather than downplaying the tariffs, the real discussion should be:
✔ How does Mexico navigate AFIP’s restrictions while keeping investment flowing?
✔ Will Mexico counter U.S. trade realignments with its own policy measures?
✔ Are Mexican industries prepared for the potential loss of U.S. contracts due to reshoring efforts?
✔ How will Mexico’s broader economic strategy evolve in response to these permanent changes?
Bottom Line: Ignoring the tariffs is not an option—because tariffs are no longer the main issue. The “America First Investment Policy” is now the dominant force shaping trade relations.
I hope I am wrong, but if this shift is permanent, companies that fail to adapt will be left behind. Mexico cannot afford to wait and see—it must act now.
Observer. I think that you are wrong.Time will tell.