Mexico says Trump tariff plan would kill 400K U.S. jobs, devastate auto sector

A sweeping 25% tariff on goods entering the U.S. from Mexico would be “a shot in the foot” that could kill 400,000 U.S. jobs, particularly in the automobile sector, a Mexican official warned Wednesday.

Mexican Economy Minister Marcelo Ebrard said he arrived at his estimate through consultation with automakers and the auto parts industry after President-elect Donald Trump threatened to impose the levy in a social media post on Monday.

Mr. Ebrard said three automakers — Ford, General Motors and Stellantis — would be hit particularly hard.

“The impact on companies is enormous,” he said at a press conference.

Mr. Ebrard said auto-sector operations in the U.S. and Mexico are highly integrated, with companies sending parts to Mexico and Mexican operators creating finished products. For instance, most of the pickup trucks sold in the U.S. are made in Mexico.

What Mr. Trump is saying, according to Mr. Ebrard, is: “We’re going to impose a tax on the most important North American companies in the world.”

Mr. Trump threatened to impose a blanket 25% tariff on goods from Mexico and Canada on Day One of his administration unless those nations rein in illegal immigration and drug trafficking across U.S. borders.

He also threatened to impose a 10% tariff on Chinese goods, in addition to existing levies, if Beijing fails to crack down on the production of precursor chemicals that criminal cartels use to make fentanyl. Fentanyl is a synthetic opioid driving the American drug overdose crisis.

Mr. Trump says tariffs are a great way to force companies to base or keep their operations in the U.S. and employ American workers while creating revenue to fund domestic programs. The U.S. relied on tariffs as a primary source of government revenue until the federal income tax was imposed in the early 20th century.

While tariffs hurt foreign countries by making their products more expensive and harder to sell in the U.S., foreign countries don’t pay the tariffs directly to the U.S. Treasury. Companies pay the levies and decide whether to pass along the cost to consumers in the form of higher prices.

It is unclear if Mr. Trump will follow through on his threat or if he is trying to compel policy outcomes before he is inaugurated.

Canadian Prime Minister Justin Trudeau said he had a “good call” with Mr. Trump after the president-elect outlined his tariff plan.

Mexico, meanwhile, signaled it was ready to play hardball if needed. President Claudia Sheinbaum penned a letter to Mr. Trump saying Mexico was ready to retaliate with tariffs on U.S. exports if the countries did not come to the table.

She said Mexico took steps to stop migrant caravans heading toward the U.S., and that Mr. Trump and the U.S. should focus on the root causes of migration. The Mexican leader also said U.S. demand for drugs is driving the fentanyl problem.

Mr. Ebrard said North American nations face two paths — they can either heap tariffs on each other and create a “division that will never end,” or they can unify into a strong region that competes favorably with other parts of the world.

“Tariffs fragment us,” he said.

Trump transition spokeswoman Karoline Leavitt responded to Mr. Ebrard’s comments by pointing to first-term tariffs that Mr. Trump imposed on China that she said “created jobs, spurred investment, and resulted in no inflation.”

“President Trump will work quickly to fix and restore an economy that puts American workers by re-shoring American jobs, lowering inflation, raising real wages, lowering taxes, cutting regulations and unshackling American energy,” she said.