MEXICO'S ANSWER TO U.S. TARIFFS TO IMPACT PORT OF B'VILLE

"When the Mexican economy sneezes, the Port of Brownsville catches pneumonia..."

By Juan Montoya

In the end, it really doesn't matter who is on the board of directors of the Brownsville Navigation District.

Or who is in the position of Port of Brownsville CEO or marketing director. Because of its geographic proximity to Mexico, it is the vagaries of the Mexican economy that direct its progress, and its declining fortunes as well.

This will become obvious as the effects of the trade war between the Donald J. Trump Administration and its southern neighbor become apparent.

Mexico is putting tariffs on imports of U.S. steel and farm products – including pork, cheese, apples and potatoes – as it hits back at the U.S. for the Trump administration's tariffs on steel and aluminum products from Mexico, Canada and the European Union.

Signed by Mexican President Enrique Peña Nieto, the decree also suspends the country's preferential tariff treatment of the U.S. It was published in Mexico's official gazette soon after Trump announced his tariffs.

The list of U.S. agricultural products, nearly all of which will be subject to taxes of 15 percent to 25 percent, includes Tennessee or bourbon whiskey and cranberries.

But more important to the port of Brownsville, the U.S. steel products on the list include steel plates, bars and rods, along with rolled steel.

In fact, the shipment and transshipment of steel products have been hailed by port boosters as one of the resurgent categories after lows in 2010 and 2013 that have lifted the port's fortunes in the past few years.

The port receives steel from all over the world. The steel is trucked to Mexico to be turned into washers, dryers, cars and the like. The Port of Brownsville is among the top three ports in the country for steel imports and exports, behind only Houston and New Orleans.

Nearly one-quarter of the port’s total volumes comprise steel products, which have remained fairly consistent over the same time period. In 2016, the port moved more than 2.15 million tons of slabs, plus 260,000 tons of cold-rolled coil, 36,000 tons of hot-rolled coil and 117,000 tons of scrap.

Now, with Mexico's tariffs on U.S. steel of 25 percent and 15 percent on transshipped foreign steel to Mexico, this golden goose may prove to be a bane on the sunshine predictions for the port's fortunes. Currently, the port transships more steel into Mexico than any other U.S. port.

And will these tariffs affect the coming of the potential coming of the $1.6 billion Big River Steel plant, which was attracted to come here because of the Mexican market. The projections of 600 jobs at $75,000 each that were to come to the port might be severely impacted – if not destroyed altogether – by the US-Mexico trade war.

In an interview in 2015, the port's CEO Eddie Campirano said much of the waterborne cargo increase was due to the growing demand for steel on the part of Mexico’s burgeoning manufacturing sector, with the port handling much of that steel, and growing consumer demand in the United States, he said.

“People are buying more refrigerators and washers and dryers,” Campirano said. “Well guess what? A lot of that comes from Mexico, crosses at Laredo and goes into the stores.”

Plus, automobile manufacturing is a “huge deal,” he said.

“Just about everybody in the automobile industry who’s anybody is there,” Campirano said. “My understanding is that there’s going to be something like seven to nine new facilities coming online between this year and 2017. I think Mexico already produces more cars than all of Europe combined, and that one of every four cars (soon) will be built in Mexico.”

The impact on the shipbreakers at the port who ship the bulk of their scrap steel to Mexico will also be severely impacted, with scrap being considered U.S. steel and a 25 percent tariff will be applied at the border.

Feeling a chill already?