As 25% tariffs on imports from Mexico and Canada are set to take effect on Tuesday, Hispanic-owned businesses and companies that depend on cross-border trade are already passing higher prices onto consumers and preparing to sharply reduce imports.
The prospect of a North American trade war has already thrown the global economy into turmoil, with consumer confidence tumbling, inflation worsening and the auto sector and other domestic manufacturers bracing for a downturn.
Trump dismissed concerns that tariffs are largely paid for by consumers through higher prices, saying: “It’s a myth.”
It is possible for a stronger U.S. dollar to offset some of the costs, but most economic modeling shows tariffs will effectively amount to billions of dollars in tax hikes nationwide. Along the border, the reality is that prices were already rising in anticipation of Trump's announcement, and much more disruption now looms.
Chamberlain Distributing represents nine different Mexican farming companies that ship about 5 million boxes of produce every year through Nogales, Arizona, to retail, wholesale and foodservice customers across the U.S. Its owner, Jaime Chamberlain, said he would raise customer prices for all the products he imports, starting Tuesday.
And if the importers of record lack the resources to pay these higher prices, Chamberlain said he won't be able to support the farmers for more than a week or two. They'll have to sell at a loss, or not at all. Not everything will sell in Mexico, he said. The tomatoes, bell peppers, cucumbers, beans, squash and other perishable vegetables will be left in the fields and in his two warehouses across the border.
He predicts similar dilemmas industry-wide: Supplies of produce coming into the U.S will decrease, and prices will increase.
Since January, retailers have been bracing for the impact on their bottom lines. Restaurants have already stockpiled non-perishable goods in anticipation of prices going up, said Raul Luis, who owns the Birrieria Chalio Mexican Restaurant with locations in Los Angeles and Fort Worth, Texas.
But Luis can't do that with the meat and fruit he sources from suppliers in Canada and Mexico. And with event catering, he can’t provide customers with a set price because he does not know things will look like in a few months.
His restaurants already use menus without prices so that he can immediately reflect changing costs without printing new ones. He's also considering reducing his menu options to avoid higher-priced ingredients. Closing either location is out of the question, he said.
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“We have to figure out ways to become more efficient,” Luis said. “We learned from the pandemic that we have to pivot and do things differently and most of our customer base understands that.”
Small businesses are particularly vulnerable, said Ramiro Cavazos, CEO of the United States Hispanic Chamber of Commerce.
“They don't have the operating revenue that larger companies have,” Cavazos said. “Small businesses would really be on the front lines of having to bear those costs and they would have no choice but to pass those costs to their consumers.”
The state of Arizona benefits from $20 billion in cross-border trade with Mexico — an economy now under stress, said Vanessa Nielsen, a spokesperson for the Arizona-Mexico Commission, which works to foster a collaborative partnership.
In fact, businesses in Mexico already raised their prices in anticipation of Trump's tariffs, and “these prices are passed ultimately to the consumer,” she said. "Businesses, they want to have some certainty, so they raise them now just in case tariffs happen and they’re already prepared.”
That supply chain is now vulnerable and border relations have been strained, with higher prices a particular concern for people who live south of the border and come into Arizona to buy groceries, she said. Tariffs “would have a weakening effect on these communities at the border that depend on that traffic from Mexico and vice versa."
Trump also set increaed the minimum tariff on all steel and aluminum imports earlier this month from 10% to 25%. This could make housing more expensive and harm the already-low profit margins of small businesses, said George Carrillo, CEO of the Hispanic Construction Council.
Carrillo said construction businesses can only stockpile steel up to a point depending on the revenue and space they have. The fear is that future projects are going to be delayed as prices shift.
“Hispanic businesses, they typically underprice the market because they’re trying to be more competitive than larger companies,” Carrillo said. “Now they have a choice — do I pass this on to the consumer or do I eat this up myself?”
