TIJUANA, Mexico—The trade fight between the U.S. and China has pushed firms to shift manufacturing to Mexico to avoid tariffs and keep prices steady. Now the prospect of new U.S. tariffs over immigration threatens to disrupt that shift and drive up costs for American consumers.
Many products made in China, from cosmetics to digital cameras, have been slowly gravitating to Mexico following a series of tariffs imposed on Chinese exports. If the U.S. begins hitting Mexico with steep tariffs—as President Trump last week threatened to do unless the country stems cross-border migrant flows—companies will start running out of options for affordable products.
Cosmetic Colors, a thriving Mexican producer of eyeliners and other cosmetic products, recently got a €7 million ($7.8 million) order from a European cosmetic giant for items that were previously made in China and faced a 25% tariff. The company’s high-end plant in the city of Toluca exports 85% of its products to the U.S. for the world’s top cosmetic brands.
“If we are told to pay a 5% tariff, I could absorb the cost,” said company chairman Tomás Espinosa. But if tariffs reach 25%, he said, the costs would be spread along the supply chain, including manufacturers, retailers and consumers, and lead to a spike in prices paid by U.S. consumers.
“Outside of Mexico or China, there’s no third country,” Mr. Espinosa said. “A similar product made in Europe could cost 40% more.”
Until now, Mexico has been seen as a winner in the trade dispute between the U.S. and China.
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