Trump Continues Talk About Mexico Car Tariffs; Expert Says It Won't Happen, but Border Delays Will Worsen

President Donald Trump denied he said Mexico has a year to improve drug interdiction (see 1904040030), but, for the second day in a row, he suggested Mexico is improving its control of migration, so he won't need to close the border soon. "I don't think we'll ever have to close the border because the penalty of tariffs on cars coming into the United States from Mexico at 25 percent will be massive," Trump told White House reporters a few hours after he made the one-year remark, on April 4.

Then, on April 5, Trump said he "never changed his mind at all" about linking migration and the border. He said Mexico has improved interdiction of Central Americans in the south of Mexico, and said, "If they continue that, everything will be fine. If they don't, we're going to tariff their cars at 25 percent coming into the United States." He said that will work "100 percent," adding, "the tariffs will work just like they've worked with steel. Our steel industry is so hot right now because of what I did with tariffs. But if it didn't work, I will close the border."

A reporter asked him why he thought he could do that, since the NAFTA rewrite allows many Mexican cars to enter duty free, and even those that don't meet rules of origin are exempted from Section 232 tariffs because of a side letter. "This will supersede USMCA," Trump replied. He made the same points on Twitter that morning.

Dan Ujczo , who chairs the Canadian-U.S. trade practice at Dickinson Wright, said he gives either Section 232 tariffs on Mexican autos or a border closure extremely low chances of becoming reality. He said the side letter that Mexicans obtained -- which took effect at signing, not upon ratification -- leaves no room for 25 percent tariffs. "Mexico did a brilliant job," he said, adding that it even protects Mexico if the U.S. raises the Most Favored Nation tariff rate for cars.

But that's almost beside the point. "Look, the enforcement mechanism isn’t going to be Chapter 20 [state-to-state dispute in NAFTA]; it isn’t litigation," he said. "At some point Congress is going to have enough." If Trump goes too far on tariffs -- and Ujczo, and many others, believe taxing car imports is that red line -- Congress will be moved to act. "The president’s political base, right here where I am here in Ohio, gave him a long leash on tariffs. He’s used up that good will," Ujczo said. "Companies want to see Trump the deal maker."

But even if tariffs aren't levied on Mexican cars, the shift of CBP personnel from ports of entry to help the Border Patrol is having a significant impact on the companies Dickinson Wright serves.

"The problem is, all of these theatrics are really masking a very serious problem on our southern border. I spent most of the day yesterday sending notes to clients," he said, noting that the ports of entry are backed up with wait times of four to five times the usual wait. He said when he was on a call with CBP yesterday, they told traders "it’s going to get worse before it gets better."

Ujczo said clients are mapping out mitigation strategies, and one thought is shifting from trucking to rail, because the shift in personnel -- 545 have already been transferred -- is not slowing rail shipments. But he said rail is more expensive than trucking, and there's not a ton of spare capacity.

Ujczo said the good news is redeployments will not affect Canadian transit times -- no transfers are being done there, CBP said -- but after these reassignments are done, CBP will turn to airports, which may shift delays to other traders' supply chains. The reassignments are only allowed for 30 days.

Many companies are certified as trusted traders, and their drivers are allowed to use FAST (Free and Secure Trade) dedicated lanes. But the lines back in Mexico are so long that the trucks can't get to that lane. "Are we going to have to dedicate some ports of entry to [Customs-Trade Partnership Against Terrorism] CTPAT and FAST?" he asked. "The problem’s only going to get worse. Holy Week is coming up, which is a huge travel period between Mexico and the U.S."

While Ujczo doesn't think the threats from Trump to close the border are shifting votes away from ratifying the new NAFTA, he said, "I think these types of issues are the types of things that tend to distract from the true issue of getting USMCA through -- and it’s time we don’t have."