400,000 Americans To Lose Jobs If US Tariffs On Mexico Take Effect

The new 5 percent tariffs president Donald Trump intends to levy on Mexico, which is now the United States’ largest trading partner on account of Trump’s trade war on China, will initially lead to the loss of 400,000 jobs throughout the U.S.

This number will jump significantly when Mexico implements its own punitive counter-tariffs targeted at states which voted for Trump in the 2016 presidential election. These mostly agricultural Red states include Texas, which is Mexico's largest export market. The tariffs will initially cost Texas more than 117,000 jobs.

Latest reports say Mexico has already drawn-up a list of American exports it will hit with higher tariffs on June 10, the date Trump said his 5 percent tariffs will take effect. These Trump tariffs are set to rise 5 percent every month until October when they reach 25 percent.

An analysis by The Perryman Group, an economic consulting firm, concludes Trump’s anti-Mexico tariffs are a huge economic gamble that might backfire on Trump.

"To impose tariffs on all goods from our largest trading partner will cause significant cost increases and other harms to the economy," said Ray Perryman, Ph.D. and CEO of the Perryman Group. "The fallout could be much greater over time."

The Perryman Group report said much of the job losses will occur in the retail trade sector, which includes clothing, furniture stores, restaurants and auto parts dealers. This sector stands to lose 136,516 jobs in total, said Perryman. In addition, more than 50,000 jobs from the manufacturing industry stand to evaporate.

"Free trade is clearly beneficial," wrote Perryman. "Basic economic theory and centuries of evidence support this fact."

Trump’s protectionist and mercantilist trade war and its reliance on punitive tariffs to attain economic and political ends make a mockery of free trade.

Perryman said the tariffs on Mexico will increase direct costs by some $28.1 billion each year. Including multiplier effects, the U.S. economy stands to lose $41.5 billion in GDP for each year the tariffs are in place.

Mexico is also key to the profitability of the U.S. auto industry, which also depends very heavily on Mexican-made parts.

Imposing the full 25 percent tariff Trump has threatened will increase the price of vehicles sold in the U.S.by an average of $1,300, according to an estimate by Deutsche Bank.

Perryman warns the economic pain will be even greater when Mexico retaliates by imposing punitive tariffs, which will force a decline in American exports. He said is firm’s analysis only covers the immediate effects of the 5 percent tariff hike.

The overall economic picture will be more devastating if Trump pushes through with his threat to levy 25 percent tariffs on all Mexican exports to the U.S.

Perryman said his estimate also doesn’t include job losses caused by the escalating trade war between the United States and China.

The 400,000 job loss estimate might even be conservative if the 25 percent tariffs on Mexico go into effect and are sustained, said Russell Price, senior economist at financial services firm Ameriprise Financial.

"The economic pain of getting to that level however, very likely precludes it from happening," noted Price.

Trump's threatened tariffs on Mexico have alarmed business groups, investors and lawmakers, including Republican senators who have blindly supported Trump. The Business Roundtable warned the tariffs are a "grave error" that will ignite "significant economic disruption.”