From avocados to beer: 5 areas taking a hit if Trump closes southern border

President Trump on Tuesday sharpened his threat to shut down the U.S.-Mexico border, a move that would create emergency conditions for some products common in the U.S. ranging from avocados and beer to cars and televisions.

The southwest border has never been fully closed, although traffic was severely restricted after the 1985 murder of DEA agent Enrique Camarena and immediately after the 9/11 terrorist attacks.

The 9/11 shutdown is the only case of a large-scale closure in the post-North American Free Trade Agreement (NAFTA) era, where the U.S. and Mexican economies have become deeply intertwined.

Trump has threatened to close the border unless Congress changes immigration laws to allow for longer family detention.

Workers and consumers in the U.S. would immediately feel the impact of a border freeze, particularly in these five areas:

Automotive

The automotive industry illustrates the co-dependency of North American economies more than any other sector.

{mosads}American car manufacturers make parts in the United States, Canada and Mexico that are integrated through complex supply chains for final assembly in plants all over the continent.

Auto industry experts estimate some parts cross North American borders eight times before they’re completed and added to a final product.

“The entire NAFTA agreement could be about cars,” said Enrique Perret, director of the U.S.-Mexico foundation.

According to the Observatory for Economic Complexity (OEC), an MIT project, the United States imported $85 billion worth of transportation equipment from Mexico in 2017, while exporting $20.9 billion worth.

“It would hit the industry hard, not necessarily the consumer [in the short term],” explained Perret, a former North America director of Promexico, Mexico’s former trade promotion authority.

A large part of automotive trade in North America is executed through intra-company purchases — for instance, General Motors in Detroit purchasing parts or cars from General Motors Mexico. In a border slowdown, production lines throughout the continent would be forced to adjust to the slower movement of parts from one country to the next.

Beer

Unlike with autos, a slowdown in the movement of perishables and consumer goods would hit the consumer almost immediately.

Mexico’s beer industry is mostly owned by the world’s two largest breweries, the Dutch Heineken and Belgian Anheuser-Bush InBev.

The two international giants have concentrated beer production in Mexico, leaving local brands like Corona and Dos Equis in their original plants, but also adding production of Old World classics like Heineken.

“Mexico is the world’s biggest producer of beer and the world’s largest exporter of beer,” said Perret.

At $3.32B in 2017, Mexican beer imports are minuscule compared to the auto industry or other manufactured goods, but they reach a wider swath of U.S. consumers.

And a border slowdown would much more quickly be reflected in higher prices or lesser availability of beer on store shelves.

Manufactured goods

From flat-screen TVs to jet engines, Mexico’s manufacturers put together thousands of American parts into finished goods.

Machines of all sorts make up 40 percent of all imports from Mexico, accounting for $123 billion in 2017; that year, the United States exported $44.6 billion of machinery, a quarter of all exports to Mexico.

Like the auto industry, machine manufacturing depends on supply chains that span across North American borders.

Manufacturing hubs that straddle the border itself would be hardest hit, as its logistical chains depend on the movement of people and goods across binational cities, like El Paso and Ciudad Juarez.

“We are the 4th largest manufacturing hub in North America,” said Jon Barela, CEO of the Borderplex Alliance, a non-profit business organization serving El Paso, Ciudad Juarez and Las Cruces, New Mexico.

“Virtually every sector, every business would see an adverse impact,” added Barela, “whether it’s retail logistics or manufacturing.”

Avocados

As with beer, consumers of Mexican produce would quickly feel a border shutdown.

{mossecondads}Perishables held at ports of entry could quickly spoil, ruining entire crops and disrupting supply lines and logistics for upcoming crops.

Multiple outlets have reported that American consumption of avocados so far outweighs production that prices and availability would be hit in a few weeks.

Some Mexican produce could be replaced with American goods.

South Florida’s tomato producers, for instance, say Mexican producers have been dumping their product on the United States, unfairly lowering prices.

But Rep. Donna Shalala (D-Fla.) says the widespread impacts of a border shutdown would end up hurting American producers, even Florida’s tomato farmers.

“[Trump’s] causing an economic hardship for the whole country. It’s the economic implications of what he’s doing. And would it help South Florida farmers? Sure, yeah, in the short term, for a short period of time. But he’s talking about turning it off and turning it on and that’s not the way you do business,” said Shalala.

In the event of a border closure, Mexico is likely to retaliate with trade restrictions on different sectors, said Perret.

Mexico’s strategy in previous trade disputes has been to deploy what they call the “carousel.”

In the carousel, Mexican authorities will impose restrictions on different American goods for short periods of time, enough to disrupt the industry in the United States, but aiming not to severely affect Mexican consumers.

Mexico’s strategy is to target products in key congressional districts, so “members of Congress will be nervous that it’ll be their product’s turn,” said Perret. 

The border

The hardest hit economic sector in any border slowdown is the regional economy of the border, much of which depends on relatively free movement of people, capital and goods.

The Trump administration’s biggest experiment in border slowdowns came last November, as authorities closed down vehicle traffic in the Tijuana-San Diego San Ysidro port of entry for five hours after a group of migrants attempted to crash the gates.

“The San Ysidro Chamber of Commerce calculated how much commerce was lost the last time they closed the border, just for five hours. That was, I believe, $5.3 million dollars,” said Rep. Juan Vargas (D-Calif.), who represents that district. Much of that impact has been attributed to employees who couldn’t get to work and holiday travelers.

“For the whole San Diego region, depends on how long you close it, you’re talking a billion dollars, you’re talking a lot more money,” Vargas added.

And Rep. Veronica Escobar (D-Texas), who represents El Paso, said the president’s threats are already taking an economic toll on the region.

“This has created incredible chaos. This threat by the president — his words have consequences,” said Escobar.

“Imagine all the time and resources — public, private sector — that we’re spending because of this threat. This is a true threat to our country. It is so beyond irresponsible and the impact to the nation if it happens, will be catastrophic,” she added.

Barela said the region’s businesses understand the challenge faced by American border authorities, but that closing the border is not the way to address said challenge.

“Closing the border would be counterproductive. It won’t solve the problem, it won’t solve the humanitarian crisis we have now, and it will at least in the short term lead to job losses,” said Barela.

Vargas added that, barring California, a border closure would mainly hit red states that voted for Trump in 2016, including Texas.

“If he really did close down the border for a long period of time, let’s say a month, he could throw us into recession,” said Vargas.

“That being said, I think a lot of people around him now are bringing him back to reality, saying, ‘this is as dumb as raking the leaves in Finland to stop forest fires,'” he added, in allusion to Trump’s claim that Finland prevents forest fires through forest management.

“When he said, ‘oh, in Finland they stop the fires by raking the leaves in the forest to stop forest fires.’ No they don’t, and Finland said, ‘no we don’t,'” said Vargas. “He doesn’t realize how large a forest is, he doesn’t realize how important the border is. So this ranks up there with one of the dumbest things he’s ever said.”

Rep. Michael McCaul (R-Texas), a former prosecutor with expertise in hemispheric trade, said he doesn’t believe Trump will go through with the threat.

“I think they’re starting to step back, they realize the economics of doing that would be disastrous,” said McCaul.