Trump’s tariffs bring more questions and fears for companies

Donald Trump’s talk to apply new tariffs to the assets of the largest commercial partners in the United States has caused months of uncertainty for business owners.

On Saturday, the president complied with his threats, ordering a new 25% tax on the shipments of Mexico and Canada and collecting existing tariffs on China’s assets by 10%.

But that has not stopped the questions.

“Is it for a day, is it a political flexion or is it something that will last four years?” Nicolas Palazzi asked, founder of PM Spirits, based in Brooklyn. He directs a business of 21 people that imports and sells wine and liquors, approximately 20% of which come from Mexico.

Trump’s orders established in motion threats that the president has discussed for months, hitting the shipments of the three main commercial partners of the United States, which together represent more than 40% of the products of approximately $ 3tn that the imports of the states of the states United every year.

Canadian oil and other “energy resources” will face a lower rate of 10%. But otherwise, there will be no exceptions, said the White House.

Trump said the tariffs were intended to hold Canada and Mexico for the promises of addressing illegal immigration and drug trafficking.

The measures enter into force on February 4 and must remain in place “until the crisis is relieved,” according to orders.

If the plans were not a surprise, they still presented a potentially impressive blow for many companies, especially for those of North America. The three countries have been linked closely economically after decades of free trade under a treaty signed in the 1990s, then known as NAFTA and updated and renowned under the Trump Administration to USMCA.

The growth of mezcal in the United States, brought by companies such as Palazzi, has been part of this change.

Since 2003, the consumption of tequila and mezcal has been tripled approximately, increasing at a rate of more than 7% each year, according to Distilled Spirits Council, a commercial group.

In general, since the 1990s, the commerce of spirits between the United States and Mexico has increased by more than 4,000% percent, said the organization, which issued a statement after the president’s announcement warns that tariffs “would damage significantly to the three countries. “

For months, Palazzi has been asking nerve questions of its suppliers in Mexico, which are generally small family businesses and may not survive if tariffs continue.

If it adheres, he said that the 25% tax on the bottles of mezcal, tequila and rum that brings prices will increase prices, and sales will decrease.

“This will definitely affect the business. But can you really plan?” “Our strategy is to fly with blows, wait and see and adapt to any madness will develop.”

Economists say that the coup of the rates could push the economies of Mexico and Canada to the recession.

Before the announcement, Dan Kelly, president of the Canadian Federation of Independent Companies, described the imminent tariffs of the United States, and expected reprisals, such as “existential” for many of its members.

“Look, we understand that the government has to respond in some way … but at the same time we urge the government to have caution,” he said, comparing tariffs with imports with chemotherapy: “It poisons your own people to try to try fight the disease. “

“It will have an effect everywhere,” said Sophie Avernin, director of De Gran Viñedos de France in Mexico, and said that many Americans have Mexican alcohol brands and model beer is actually owned by a Belgian company.

Trump, who has adopted tariffs as a tool to address very eliminated problems of trade, has dismissed concerns about any collateral damage to the economy in the United States.

But analysts have warned that the measures will weigh on growth, raise prices and cost the work of the economy, approximately 286,000, according to estimates of the Fiscal Foundation, not including reprisals.

Those in the alcohol business said that the industry had already been fighting to get out of the shadow of the pandemic and its after the shots, including inflation, which has led many Americans to reduce the exit and drink.

The smallest companies, which generally have less financial cushions and the ability to swallow a sudden jump of 25% in the cost, will give the worst part of the interruption.

“I am quite frustrated,” said the importer based in California, Ben Scott, whose business of nine people of flavor brings in brands of Mexico as well and lalocura.

“There is only a great cost that will affect so many people differently in a way that is not a couple of dollars more for a cocktail, which does not sound like a tragedy.”

Fred Sánchez has spent years pressing to expand his business, Bad Men Importing, a small importer and distributor based in California of Mexican spirits based on agaves such as Agua del Sol, and was recently working in agreements in New York and Illinois.

But his potential partners began to doubt when Trump’s conversation increased last year.

Now, instead of expanding, you are contemplating to sell your liquor stock and possibly close. He said he had little capacity to absorb costs and saw little range to increase prices in the current economy.

“25% is not something that we can realize the consumer,” he said.

Sanchez said he believed that Trump could be using tariffs as a negotiation tactic, and that the tax could be of short duration. Even so, for your business, the damage is already done.