Experts: How Mexico Tariff Uncertainty Is Stalling North American Investment

When Diego Marroquín Bitar started his keynote speech in Atlanta Thursday, he held up his smartphone for the audience, advising them to keep theirs close by. 

“Don’t get distracted, but you might see a tweet from President Trump, and that might change the entire conversation. It has happened to me before,” said the expert on North American trade from The Wilson Center, visiting from Washington.

The crowd laughed, but he wasn’t far off: A few hours after the breakfast at the Gwinnett Chamber’s 1818 Club, news alerts started rolling in. 

Mr. Trump and Mexico’s president, Claudia Sheinbaum, had reached their latest temporary truce in a back-and-forth dance that has continued since April. 

Perhaps the outcome could have been expected, given the timing of the event, which also included a panel discussion with local business leaders invested in Mexico. 

Hosted by the Latin American Chamber of Commerce of Georgia in partnership with the Consulate General of Mexico, the breakfast took place one day before Mr. Trump’s Aug. 1 deadline, which had already been pushed back twice. 

For Georgia, which counts Mexico as its largest trading partner, where things land matters significantly. 

According to the Brookings Institution’s USMCA tracker, which Mr. Marroquín helped create during his time at the think tank, the state’s trade with Mexico is responsible for more than 30,000 jobs. That number jumps to 70,000 when including Canada. 

Mexico was facing down a 30 percent tariff Thursday morning; it ended the afternoon with a 90-day pause side-stepping the worst of the proposed disruptions to the flow of goods across the southern border. Canada, for its part, was not so lucky, seeing its rate increase to 35 percent.

Mexico is still dealing with a 25 percent emergency tariff Mr. Trump imposed ostensibly to motivate Mexico to tackle the flow of migrants and fentanyl into the U.S. 

Still, there’s an exemption for goods that comply with the U.S. Mexico Canada Agreement (USMCA) negotiated as NAFTA’s successor during Mr. Trump’s first term, which continue to enter the U.S. from Mexico duty-free. Cars face a 25 percent tariff, but only on the value of their parts made outside North America. A 50 percent Section 232 tariff on steel, aluminum and copper remains, even on USMCA-compliant goods, a category that covers only about half of bilateral trade. 

The problem, from Mr. Marroquín’s perspective, is not just the tariffs rates themselves; it’s what the process reveals about the transactional nature of the new U.S. approach. 

“Tariffs first, allies be damned. Allies are optional now. Tariffs are here to stay. They’re part of the economic and geopolitical strategy of the U.S. administration,” Mr. Marroquín said. “They are no longer used to protect certain industries. Now they’re used as a tool for leverage and to accelerate commitments from other parties, not only on trade, but also security, decoupling from China and immigration.”

“Tariffs first, allies be damned. Allies are optional now.”

Diego Marroquin Bitar, Inaugural Bersin-Foster North America Scholar at The Wilson Center

Mr. Marroquín has warned Mexico against giving up too much in the short-term, lest the enduring costs to Mexican competitiveness outweigh the temporary relief. 

The U.S., he explained, has not defined the type of progress that would lead to the lowering of trade tensions.

To wit: Mr. Trump’s reasons for imposing the trade under the International Emergency Economic Powers Act, fentanyl seizures and border apprehensions, have dramatically declined since talks began. 

“And still, Mexico is not off the hook. It is very easy for this administration to keep moving the goal posts,” Mr. Marroquín said.

Perhaps more damaging than the tariffs themselves is the uncertainty stemming from constant negotiations, Mr. Marroquin added. Car makers, for instance, tend to need eight to 10 years to introduce a new model. 

“So you need to know what the rules of the game are going to be for at least a decade,” he said. 

Companies, meanwhile, have to fight the threat of getting bogged down in the minutiae of long-term scenario planning, even as they struggle to stay compliant and reduce day-to-day. 

More important than parsing out the costs a tariff adds to a component is figuring out where and when to invest longer-term, says Jim Reed, president of YKK Corp. of America, the Western Hemisphere unit of the Japanese-owned zipper and fastening company. 

“There are no decisions being made when you have that type of uncertainty,” Mr. Reed said, noting that he has seen projects skip Mexico and move to Vietnam during previous times of uncertainty. “What happens then is that capital moves, so the capital that was thinking about a factory somewhere in this region might choose another region.” 

To demonstrate the importance of North American integration as a competitive advantage, Mr. Reed brought props: YKK hook-and-loop fasteners that go into automotive seats. They’re made at the company’s Irapuato plant just north of Mexico City, but with materials from Macon, Ga., and elsewhere. Then they’re shipped to foam and upholstery companies as those pieces are fabricated, crossing the border many times. Trump tariffs hit components each time, as well as the finished products.

Integration and specialization, Mr. Reed said, are the only means by which North America can compete with Asia, he said, agreeing with an earlier point from Mr. Marroquin. 

“If there was a simpler way to do it, we’d do it,” said Mr. Reed. 

Marek Brabec, operations manager at Albaform, a tier-three supplier of seat frames for automotive OEMs operating in the Southeast U.S., said parts suppliers face such low margins that eating the costs of tariffs is not an option. 

“You cannot just absorb it. It would put you out of business,” Mr. Brabec said, noting that the Czech Republic-founded company, now manufacturing in Flowery Branch, Ga., is facing a tariff crunch in both Europe and the Americas. 

That means one of two things: higher prices for consumers, or lower profits from car makers, many of which reported that tariffs dinged their earnings to the tune of billions dollars in the second quarter. 

“For us, every tariff is damaging. It doesn’t matter if it’s 15, 50, 100 percent, it damages the prices, and at the end, we’ll have to take that tariff, and who’s going to pay for it is the consumer,” Mr. Brabec said. 

Albaform put an operation in Queretaro, Mexico, earlier this year, choosing the state to be close to some of the same German partners it works with in the U.S.

The rationale behind the Mexico operation, Mr. Brabec said, was inp part to make some smaller products at more affordable prices, due to pressure from China. 

Jonathan Picard, general counsel at East West Manufacturing, said the Atlanta-based contract manufacturer was founded to help customers find the optimal sourcing mix by blending pricing and proximity.

Started with a focus on China sourcing, East West opened its own facilities in Vietnam and then followed customer requests for diversification, opening a network of facilities in Costa Rica, Canada, the United States and most recently, two factories Juarez, Mexico, just across the U.S. border. 

The move has worked wonders at a time when so-called near-shoring is en vogue and customers are investigating the cost implications of leaving Asia, he said. 

“They see the pricing, and it can still remain a challenge, but Mexico offers such a fantastic bridge for us. Pricing-wise, it may not be exactly as cheap as Southeast Asia is for a lot of manufacturing, but our opportunity to provide really great pricing and really great service, expertise and technology in Mexico is incredible.”

He noted that one factor missed in all the discussions about shifting supply chains — how expensive and challenging it is to shift production, which can take more than a year. In that way, short-term tariffs don’t often shift the calculus for long-term investment decisions. 

“You can’t model, you can’t plan for that,” he said, noting that even elevated tariff rates would be bearable if they were predictable. “Even in kind of a worst-case scenario, if you knew what it was going to be, you could make a business decision. It’s very hard to make business decisions at this stage.” 

Unfortunately, Mr. Marroquín said, the volatility doesn’t seem set to end anytime soon, as the USMCA approaches its six-year review in 2026 that will likely bring about some spirited haggling. 

The most likely scenarios, he added, are a “painful extension” that requires concessions from Canada and Mexico, or a lack of consensus, which could trigger annual reviews to avert the deal’s potential expiration in 2036.

Another wild card is that any of the three parties can withdraw from the agreement at any time with six months of notice. That outcome wouldn’t be the “end of the world” from a tariff perspective, but would be a blow to integrated supply chains built over three decades, Mr. Marroquín said. 

“Without reaching a solution or an agreement to extend, rules would drift, there would be more uncertainty, and investment would decline.” 

See all the speakers and the full event listing here or on Global Atlanta here. Managing Editor Trevor Williams moderated the fireside chat session at the event, which was sponsored by Delta Air Lines and Aeromexico.

Learn more about the LACC Georgia here and the Mexican Consulate General here.

See data from the Brookings USMCA Tracker’s Georgia fact sheet below:

GA_BrookingsUSA_2025