A Trump administration shutdown of the U.S.-Mexico border would quickly spread across the economy, spiking fruit and vegetable prices, spawning food shortages, shutting production lines and throwing Americans out of work, at least temporarily.
“With thousands of trucks and trains and cars crossing the border each day, you’d have huge backlogs, rotting produce and ripple effects across the supply chain,” says Dan Griswold, senior research fellow and trade expert at George Mason University. “The effect would be immediate and devastating for industry.”
President Donald Trump is threatening to close the border unless Mexico takes steps to stop a wave of migrant families, mostly fleeing Central American countries with high levels of poverty and violence, from reaching the U.S. border.
The impact would be widespread because the supply chains of U.S. and Mexico are so tightly integrated and “just in time inventory” has manufacturers and retailers carrying limited stocks to reduce costs, Griswold says.
With about $1.7 billion in goods crossing the border every day, the effects would dwarf the fallout from the 10% tariff Trump has slapped on more than $200 billion in imports from China, says Gary Hufbauer, senior fellow at the Peterson Institute for International Economics.
“This will be a real shock,” Hufbauer says.
Here’s the big picture: The U.S. imported $346 billion in goods from Mexico last year and exported $265 billion in products to the country. Of the $611 billion in trade between the two countries, $502 billion crossed the border in trucks and trains last year, according to the Commerce Department.
More than 13% of all U.S. imports come from Mexico, with some products making up an outsized share. Shipments from Mexico comprise more than a third of all auto and auto-part imports, nearly half of imported vegetables and 40% of imported fruits, according to the Peterson Institute and the U.S. Department of Agriculture.
Economywide, the effects would be far more punishing for Mexico, which could slip into recession, Hufbauer says. Border trade represents 37% of Mexico’s gross domestic product compared with about 2% of U.S. GDP, according to Moody’s Analytics.
Economist Hoyt Bleakley of the University of Michigan likened a brief shutdown of a few days or a week to a blizzard that does little damage to the economy as shippers rapidly catch up.
Even a prolonged shutdown that lasts a few months would likely shave quarterly U.S. economic growth by just two-tenths of a percentage point, still fairly modest, Hufbauer says. A shutdown, he says, could have broader effects by hurting business confidence.
About 5 million American jobs depend on border trade, according to the U.S. Chamber of Commerce.
Source: Yahoo News