Companies that rely on international trade were already struggling with increased prices in anticipation of the new 25% tariffs on Mexican and Canadian imports, which became active on Tuesday. With these changes, further disruption is expected, and businesses may have to downsize or lay off employees if customers refuse higher prices.
The threat of a trade conflict across North America has already sent ripples through the global economy, shaking consumer confidence, intensifying inflation pressures, and causing the automobile industry and other domestic manufacturers to prepare for a possible decline.
President Trump, on the other hand, dismissed concerns about consumers bearing the costs through higher prices, calling it “a myth.”
However, on the ground near the border, prices were already surging prior to Trump’s tariff announcement, indicating a looming disruption.
Jaime Chamberlain, owner of Chamberlain Distributing which represents multiple Mexican farming firms, plans to increase prices for all imported products, reflecting the new tariffs’ costs. Chamberlain’s company annually moves around 5 million boxes of produce through Nogales, Arizona, serving U.S. retail, wholesale, and foodservice markets.
If middlemen lack financial resilience to meet these new prices, Chamberlain noted he can’t continue backing the farmers for long. Products such as tomatoes, cucumbers, and other fresh vegetables might end up not selling and remain either in the fields or warehouses.
This predicament extends across the industry, with expected drops in imported produce supply and consequent price increases.
Since the start of the year, retailers have been preparing for these financial impacts. Meanwhile, restaurant owners like Raul Luis, operating Birrieria Chalio Mexican Restaurant in Los Angeles and Fort Worth, have been stockpiling non-perishable goods.
Despite these precautions, Luis faces challenges sourcing meat and fruits from Canada and Mexico, casting uncertainty over future event catering costs. His restaurants now offer menus lacking fixed prices to adapt quickly to fluctuating costs without reprinting.
Contemplating efficiency improvements and potentially curtailing menu choices, Luis emphasized that closing either of his restaurant locations isn’t an option.
“Efficiency is essential,” Luis said, noting lessons from the pandemic that necessitated operational pivots understood by most of their clientele.
According to Ramiro Cavazos, CEO of the United States Hispanic Chamber of Commerce, small businesses are especially at risk.
“Lacking the financial buffer of larger companies, small businesses would be forced to pass these costs onto consumers,” Cavazos explained. “These tariffs place them on the economic frontlines.”
Arizona witnesses significant economic benefits from its $20 billion cross-border commerce with Mexico, an economy currently at risk, said Arizona-Mexico Commission spokesperson Vanessa Nielsen.
In response, Mexican businesses are proactively adjusting their prices in anticipation of U.S. tariffs, impacting both sides of the border economically.
The supply chain now faces vulnerabilities along with deteriorating border relationships, she remarked. “Higher prices directly affect communities at the border reliant on Mexican consumer traffic.”
Additionally, the tariff on steel and aluminum imports was raised from 10% to 25% earlier this month. George Carrillo, CEO of the Hispanic Construction Council, noted potential housing cost impacts and threat to narrow margins for small businesses.
Construction firms, he said, can only stockpile materials like steel to a certain extent based on financial and space constraints. There’s growing concern about project delays due to volatile pricing.
“Hispanic businesses often underbid to stay competitive, but now they face tough choices: raise consumer prices or bear the added costs themselves?” Carrillo posited.
Border Prices Surge Before Trump’s Tariffs
