• Skip to main content
  • Skip to secondary menu
  • Skip to primary sidebar
  • Skip to footer
  • Canada
  • United Kingdom
  • Subscribe
  • facebook
  • instagram
  • RSS
  • RSMUS.com

The Real Economy Blog

Search

  • Economics
  • Technology
  • Consumer
  • Industrials
  • Finance
  • Real Estate
  • Health Care
  • Life Sciences
Home > Economics > Mexico tariff poised to hurt California tech economy

Mexico tariff poised to hurt California tech economy

Jun. 3, 2019 by Victor Kao

  • email
  • Twitter
  • Facebook
  • Linkedin

A proposed new tariff on Mexican imports could have a devastating impact on California’s technology sector; the state imports a disproportionate amount of goods from the United States’ southern trading partner and conversely exports a large amount of products over the border.

President Trump on Thursday threatened a 5 percent tariff on all goods from Mexico starting June 10, unless Mexico sharply curtails immigration to the United States. The proposed tax could escalate to 25 percent by October. Because of U.S. manufacturing dependencies on Mexico, those moves could result in a devastating impact on overall supply chain and send U.S. inflation even higher than tariffs imposed by China, whose trade disputes with the United States have escalated into a trade war. The United States imports roughly $350 billion in Mexican goods (compared to $150 billion from China).​

Mexico imports

A 25 percent levy on Mexican goods could reduce U.S. gross domestic product by 1 percent in 2020, according to Oxford Economics U.S. economist Gregory Daco. He asserts that the impact to California’s economy could be particularly damaging. With roughly $44 billion of annual imports from Mexico, California is the third-largest importer of Mexican goods. One can expect retaliatory measures from Mexico that could threaten the $30.7 billion of exports California sends to Mexico each year, the majority being computer equipment and electronics. Figure A above shows further impact on state goods imported from Mexico, which could have a ripple effect across the nation.

One can expect retaliatory measures from Mexico that could threaten the $30.7 billion of exports California sends to Mexico each year, the majority being computer equipment and electronics.

Companies doing business with Mexico should consider measuring their exposure to bilateral trade and weigh tariff impacts in 5 percent increments to determine margin pressures due to increases in cost of goods sold, and the breaking point for boosting retail prices. Finding alternate supply chain sources could be worth looking into, as well as implementing or leveraging technology to improve overall efficiencies to offset the increases in cost.

  • email
  • Twitter
  • Facebook
  • Linkedin

Related posts

  • Real Economy Canada announcement image
    Tech is taking hold in Canada--The Real Economy, Canada has the story

    Either by federal and local government promotion of technology or the invisible hand of capitalism, technology has taken hold in cities throughout Canada. The knock-on benefits to local economies as tech industries establish footholds include: the revitalization of…

  • Is the economy headed for recession?

    A confluence of factors is conspiring to lay the groundwork for conditions increasingly threatening an end to the current business cycle.

  • Real Economy Canada announcement image
    RSM launches Canadian edition of The Real Economy

    In the inaugural issue of The Real Economy, Canada, RSM Chief Economist Joseph Brusuelas closely examines the primary drivers of growth for 2019, which include modest consumer spending, government expenditures, and an economy bolstered by an increase in…

Filed Under: Economics, Tech, Media and Telecom

About Victor Kao

@victorkao4

Victor provides a unique blend of accounting, operations, and IT subject matter expertise, and leads a wide spectrum of projects including internal audit, Sarbanes-Oxley compliance, systems organization controls readiness and attestation, business process improvement, and information technology assessment services. Prior to joining RSM, Victor served in senior management roles in a variety of industries, including consumer products, food and beverage, technology, banking, and financial services. Currently, Victor’s core industry and subject matter expertise lies within technology.

Victor has substantial IT risk advisory experience leading and coordinating ERP software selections and implementations, IT general controls review, segregation of duties analysis, cybersecurity, and system and organization controls readiness and attestation. In 2018, Victor was selected as a senior analyst in RSM’s cutting edge Industry Eminence Program, which positions participants to understand, forecast and communicate economic, business and technology trends shaping the industries RSM serves. These senior analysts advise clients on conditions impacting middle market leaders.

Primary Sidebar

Other Regions

  • Canada
  • United Kingdom

Categories

  • Economics
  • Technology
  • Consumer Products
  • Industrials
  • Financial Services
  • Real Estate
  • Health Care
  • Life Sciences

Recent Technology articles

5 trends from defense technology companies’ Q3 earnings calls

Jan. 4, 2021

CHART OF THE DAY: December is anticipated to be the biggest on record for IPOs

Dec. 10, 2020

CHART OF THE DAY: Dealmaking in the cybersecurity sector continues its strong year

Nov. 25, 2020

Recent Economics articles

  • CHART OF THE DAY: Manufacturing upturn strongest since 2014 Jan. 22, 2021
  • China’s economic power: You may not like it, but you cannot ignore it Jan. 22, 2021
  • Inflation-adjusted interest rates, investment and the middle market Jan. 22, 2021

RSMUS.com links

The Real Economy

Middle Market Business Index

MMBI Special Reports

Footer

  • Facebook
  • Instagram
  • RSS

About The Real Economy Blog

The Real Economy Blog from RSM US LLP was developed to provide timely economic insights about the middle market economy. It is offered as a complement to RSM’s macroeconomic thought leadership, including The Real Economy monthly publication and the proprietary RSM US Middle Market Business Index (MMBI).

© 2021 RSMUS.com | Privacy Policy | Cookie Policy

The Real Economy Blog
  • Economics
  • Technology
  • Consumer
  • Industrials
  • Finance
  • Real Estate
  • Health Care
  • Life Sciences