Colorado -- and the rest of the nation -- are watching nervously to see if President Donald Trump imposes new tariffs on imports from Mexico.
Here's what you need to know -- and why you might want to buy those avocados and tomatoes now.
Trump, who proposed the new tariffs in a Tweet last week, has set a deadline of Monday, June 10, to start imposing tariffs on Mexican imports unless Mexico takes steps to stem the flow of Central American migrants crossing the border into the United States.
The tariffs would beginning at 5% and increasing by 5% per month until it reaches 25%.
Trump announced he would levy those tariffs under his authority granted by the International Emergency Economic Powers Act, or IEEPA. The act has been used by presidents 54 times since its passage in 1977, usually to stop financial transactions dealing with foreign governments.
Congress passed the act when it was discovered that the United States had been in a state of emergency for 40 years. Its passage was intended to rein in presidential emergency powers.
President Jimmy Carter first used it in 1979, to block Iran from using its financial assets held in the United States, in the wake of the US Embassy hostage crisis.
Once declared, IEEPA declarations last on average up to a decade, although the declaration against Iran is now headed into its fifth decade.
The 1976 National Emergencies Act allows Congress to terminate a national emergency by adopting a joint resolution, according to the Congressional Research Service. But Congress has never terminated an IEEPA declaration.
Mexico was the United States' second largest supplier of goods imports in 2018, according to the U.S. Trade Representative (USTR). Those imports -- valued at $346.5 billion in 2018 -- represent 13 percent of all imports to the United States. Only China imports more goods.
Imports of agricultural products -- including fresh fruit and vegetables -- totaled $26 billion in 2018, the USTR reported.
Impact on Colorado
Imports from Mexico to Colorado were valued at $1.53 billion in 2018, and the state's exports to Mexico were valued at $1.25 billion last year, the U.S. Census Bureau reports. Mexico was Colorado's second-largest international export market in 2018 and third-largest import market.
Don Shawcroft, president of Colorado Farm Bureau, said the tariffs are definitely a concern for Colorado agriculture, in part because of the potential for Mexico to retaliate with its own tariffs.
“I wouldn’t be surprised” if Mexico took that step, Shawcroft told Colorado Politics. “It’s a typical move” and one that shouldn’t surprise the President, either.
That would hit Colorado ag, especially beef exports, hard, Shawcroft indicated. Agriculture “has literally taken the brunt of punishment” from tariffs imposed by other nations like China, he said.
Colorado’s beef exports benefit financially, Shawcroft said, because the state exports a premium qualify beef that produces higher prices.
But food is a commodity that can be purchased from anywhere, meaning once Colorado agriculture becomes too expensive because of tariffs, nations will turn elsewhere.
That’s already happened in the trade war with China. According to CNBC, Mexico has benefited from the US-China trade war, with the United States importing products from Mexico that it previously imported from China. But that could come to a halt with a tariff on Mexican imports.
“There’s plenty of uncertainty in agriculture” without another tariff, Shawcroft added. “We are holding out hope for good talks” between the U.S. and Mexico “but this is making us nervous.”
It's making Colorado's beef industry nervous too. Terry Fankhauser, executive vice president of the Colorado Cattlemen's Association, pointed out that Colorado's cattle industry will see an immediate impact if the tariffs are imposed. That impact will be on Colorado feedlots that import cattle from Mexico. Nationwide, 1.3 million head of cattle are exported to the United States from Mexico, Fankhauser said.
A 5% tariff could be the difference between profit and loss, Fankhauser told Colorado Politics. "It jeopardizes profitability for the feedlots. They move a lot of cattle and they make only a small profit" on each head, calling it a matter of volume.
According to Mexico’s Ministry of the Economy, Mexican companies operate 85 business establishments in Colorado and provide 1,382 local jobs. In addition, in 2017, Mexico imported about $270 million in Colorado beef and pork products, the top two commodities exported from Colorado.
The impact to Colorado consumers under a new tariff on imports from Mexico could be as much as $382 million annually, if a 25% tariff, as threatened by President Trump, comes to fruition, the U.S. Chamber of Commerce said this week.
Then there’s the potential effect on the U.S.-Mexico-Canada agreement (USMCA), aka NAFTA 2.0.
The USMCA was signed last November by the three nations’ leaders but it still has to be ratified by legislative bodies in all three nations. Trump, in December, said he would start a six-month process to pull the U.S. out of NAFTA, hoping it would put pressure on Congress to pass the agreement. Were the U.S. to pull out, trade would revert back to rules established before NAFTA was adopted in 1993. Trump has since backed off on that threat.
Passage of the USMCA is viewed as a critical win for Trump as he heads into the 2020 election.
But adoption of the USMCA is far from assured, even with the added problems that a tariff on Mexican imports could impose.
Trump’s decision on Mexican tariffs isn’t going over well with longtime Republican allies in the U.S. Senate, nor business groups like the U.S. Chamber, which is threatening to sue the administration to block the tariffs.
While the U.S. Chamber said it would have a decision on a lawsuit by last Monday, officials did not respond to request for a status on that decision.
Republican Sen. Chuck Grassley of Iowa, in an op-ed published by the Wall Street Journal and as reported by Business Insider, said last month that the USMCA is “dead” unless Trump backs off on tariffs assessed on steel and aluminum. Grassley is chair of the Senate Finance Committee which is responsible for first approval of the agreement. Trump later agreed to drop the tariffs on steel and aluminum.
Fankhauser said ratifying the USMCA is a top priority for his organization. "It's very important we see that a free trade agreement go forward," he said. It's important because taxing products diminishes the overall exchange of products between countries and that limits the economic health of businesses, including the beef industry, he explained, given that Mexico is one of the top exporters of American beef.
Colorado lawmakers react
Some of the members of Colorado’s congressional delegation are weighing in on whether they support the imposition of tariffs. It’s largely “no.” The question then becomes whether they’re willing to do anything about it.
And all eyes are on Republican Sen. Cory Gardner, named the Senate’s most vulnerable Republican for the 2020 elections.
Gardner told Bloomberg News Monday that tariffs are “a bad idea, plain and simple.” His office declined to comment about whether his opposition would include any efforts to overturn the President’s authority under IEEPA.
But according to the New York Times, Senate Republicans held a closed-door meeting on Wednesday with White House officials on Trump’s legal authority to impose the tariffs.
Sen. Ted Cruz of Texas told the officials that "I want you to take a message back’” to the White House," the Times reported, based on information from people who were in that meeting. Cruz reportedly added that "you didn’t hear a single yes" from the Republican conference and said the tariffs would result in a $30 billion tax increase on Texas.
Among other members of Colorado’s congressional delegation, Democratic Rep. Joe Neguse of Lafayette told Colorado Politics in a statement that “The President’s threat to impose tariffs on Mexico provides no solutions with respect to reforming our immigration system. Instead, it will hurt American workers, American consumers and Colorado small businesses in a real and tangible way, and potentially sow further chaos over the situation on our southern border. Instead of engaging in unnecessary trade wars, the President’s time would be better spent working collaboratively with Congress on comprehensive immigration reform.”
Neguse won kudos from House Democrats Tuesday for a fiery defense of their efforts to pass a bill providing citizenship to Dreamers -- people who were brought to the U.S. illegally as small children and have lived here for years. The House passed that bill Tuesday on a 237 to 187 vote, with "yes" votes from Colorado's four Democratic representatives and "no" votes from the three Republican representatives.
Democratic Sen. Michael Bennet of Denver told Colorado Politics that "tariffs on Mexico will hurt American consumers, workers, and businesses, and will do absolutely nothing to solve the real challenges on our border. The fact that the president is conflating the two only shows how little he knows about both issues.”
In addition, the president "is further escalating his self-inflicted trade war, and placing tariffs – especially ones opposed by his own party -- on an important trade ally [like Mexico] doesn’t seem like a successful approach.”
Democratic Rep. Diana DeGette of Denver said she opposes the tariffs and believes the administration plan to impose those tariffs could jeopardize passage of the USMCA.
A statement from the office of Republican Rep. Scott Tipton of Cortez said: "Congressman Tipton knows the importance of trade agreements with Mexico and Canada, especially for Colorado’s farming and ranching communities. He is closely monitoring the conversations surrounding additional tariffs on Mexico. Nancy Pelosi controls the House floor schedule and the Congressman urges her to quickly bring the USMCA up for a vote."
Anne Feldman, the communications director for Democratic Rep. Jason Crow of Aurora, said “Just like with the President’s tariffs on China, which Rep. Crow condemned two weeks ago with other members of the Small Business Committee, any tariffs on Mexico will directly hurt Coloradans and Colorado businesses. As Colorado's second largest trading partner, the 6th district relies on its relationship with Mexico and threatening it will only hurt local businesses and Colorado as a whole."
Colorado Politics did not receive responses from Reps. Ed Perlmutter, Ken Buck (who's in the hospital) or Doug Lamborn.
Trump, in France for D-Day celebrations, told reporters Thursday that “a lot of people, senators included, they have no idea what they're talking about when it comes to tariffs. They have no — absolutely no idea.”
The Trump administration continues to negotiate with Mexican officials over immigration in an effort to stave off the tariffs. Thursday was the second day of talks over the tariffs, but Politico reports key players -- including Vice President Mike Pence and Secretary of State Mike Pompeo -- are not taking part in those discussions due to commitments elsewhere.
The Washington Post reported Thursday afternoon that negotiators had come up with the "outline of a deal" that would give the United States "more latitude to deport Central American refugees" who seek asylum. However, the negotiators appeared skeptical that it would pass muster with President Trump.