The threat of new tariffs on Mexican imports would deal a blow to South Carolina's automotive industry by raising prices on roughly $800 million worth of car parts that America's neighbor to the south sends to the Palmetto State each year.
President Donald Trump has said he will implement a 5 percent tariff on the imports beginning Monday if Mexico does not step up efforts to stop illegal immigration at the southern U.S. border. Those tariffs would increase to 25 percent by October if Trump doesn't think Mexico is doing enough to stem the flow of migrants.
Republican senators said this week they might seek to block the tariffs even as Trump said they would be "foolish" to try.
South Carolina's vehicle makers wouldn't speak directly to the threat of Mexican tariffs, or say exactly how many parts they get from that country. But for an industry that employs 61,000 state residents and generates $27 billion in annual economic impact, any trade dispute is a concern.
"The (Trump) administration wants us to build cars in the U.S. and reduce the (U.S.) trade deficit," said Hakan Samuelsson, CEO of Volvo Cars, which builds its S60 sedan at a $1.1 billion manufacturing campus off Interstate 26 near Ridgeville.
"We will eventually build 150,000 cars in the U.S. of which half will be exported," he said. "I hope the administration sees that and taxes somebody else."
Daimler AG, which builds Sprinter vans at its $500 million Mercedes-Benz Vans plant in North Charleston, said in a statement that it "welcomes trade agreements that reduce trade barriers and promote free and fair trade."
"Free trade and investments are key factors for innovation, employment, growth and prosperity," said Alyssa Bean, spokeswoman for the van maker. "Trade disputes always entail uncertainties, both for companies and for customers."
The tariff threat comes at an inopportune time for BMW, which has its largest manufacturing plant in Spartanburg County. The German automaker, which depends on Mexican made parts for its Upstate-built X-model SUVs, recently opened a $1 billion assembly plant in San Luis Potosi, Mexico, to make 3-series models for the U.S. market.
Mexico last year sent $3.85 billion worth of goods to South Carolina, accounting for about 10 percent of all imports to the state. Nationwide, Mexico sent more than $346 billion of products to the U.S., including nearly $60 billion in automotive parts. That's the largest amount from any foreign country, with China second at $20.1 billion.
Most of the goods shipped from Mexico to South Carolina come by truck or rail. The biggest seaborne import is synthetic plastic, which accounted for 1,249 cargo containers at the Port of Charleston — or less than one-100th of total imported containers last year.
"Imposing tariffs on goods from Mexico is exactly the wrong move," Neil Bradley, chief policy officer for the U.S. Chamber of Commerce, said in a statement. "These tariffs will be paid by American families and businesses without doing a thing to solve the very real problems at the border."
The U.S Chamber said Trump's initial tariff would cost South Carolina businesses and consumers an extra $200 million, with that figure ballooning to nearly $1 billion if the import tax is raised to 25 percent.
A separate report from Mexico's Ministry of the Economy says more than 70,000 South Carolina jobs depend on trade with Mexico.
David Schwietert, interim president and CEO of the Alliance of Automobile Manufacturers, called the tariffs "harmful to our nation's economy," adding the automotive industry "relies upon the North American supply chain and cross-border commerce to remain globally competitive."
Mexico isn't the only tariff trouble spot. The Trump administration's ongoing trade tensions with China and the European Union have forced automakers to shift production sites and issue profit warnings. Samuelsson, for example, cited the U.S. trade war with China as one factor in Volvo's profit plunge to 5.6 percent in 2018 — down nearly 18 percent from the previous year.
Last week, the White House announced that it is terminating a trade designation for India that had exempted billions of dollars of that country's products from U.S. tariffs. India has threatened to retaliate with new tariffs on U.S. goods.
The move has Volvo thinking of shifting some production of the S60 from South Carolina to the manufacturer's plant in Bengaluru next year.
"We are considering local assembly," Charles Frump, managing director at Volvo Car India, told Autocar India. "That's the decision that has taken us a bit of time to sort out, but we haven't made a final decision on that yet."
America's expanding trade conflicts have economists worried the U.S. is on the verge of a recession.
The National Association for Business Economics said Monday that increased protectionism is the greatest downside risk to the U.S. economy. In a survey, the group's economists said the risk of recession is only 15 percent in 2019 but will rise to 60 percent by the end of next year.