‘Nervous and worried’

BY MATTHEW NARVAIZ JOURNAL STAFF WRITER

John Gonzales said the price of a case of large avocados jumped $20 this week, the high end of what he said he and his grandfather, who owns The Fruit Basket ABQ, usually pay.

He wondered this week if this was a sign of things to come — and maybe stay — as the Trump administration prepares to impose a 25% tariff on goods imported from Mexico and Canada and a 10% tariff on China.

Trade experts across the state are closely monitoring what Trump’s tariffs, which are set to be implemented this weekend, will mean for the state’s economy. Businesses like Gonzales’ are preparing to pay higher prices to their vendors and, just maybe, order less.

The tariffs affect countries that account for more than a third of the goods and services imported or brought to the United States. In Mexico, produce, auto parts and

electronics make their way across the border — sometimes at high rates.

The tariffs come in Trump’s second week in office. His White House Press Secretary Karoline Leavitt told reporters Friday the tariffs are in response to the “illegal fentanyl they have sourced and allowed to distribute into our country, which has killed tens of millions of Americans,” adding that these are “promises made and promises kept by the president.”

‘Nervous and worried’

Many companies operating in New Mexico also have operations, or “sister” plants, on the other side of the border, said Jerry Pacheco, president and CEO of the Border Industrial Association.

The tariffs could potentially be applied to U.S. products sent back and forth to and from Mexico that are being assembled at different points, Pacheco said.

“Let’s say a steel supplier cuts a triangular piece of steel, sends it to a Mexican factory, they punch holes in there for screws or bolts,” Pacheco said. “That product then comes back to the United States and gets powder coated. That powder- coated product goes back to Mexico, and now it’s assembled into a car or an appliance. … That is very common.”

Pacheco’s organization represents about 80 companies in Santa Teresa, New Mexico’s largest industrial base. The Santa Teresa Port of Entry, thanks to the businesses in the area, accounts for more than $27 billion worth of trade, Pacheco said, making the area the sixth- or seventh-largest port of entry in terms of volume along the U.S./Mexico border.

He said many companies in Santa Teresa are slowing down business in response to the tariffs.

“These companies are extremely nervous and worried, to say the least, about what’s going to happen,” Pacheco said. “A lot of the companies I’m talking to are kind of postponing major expansions or hirings because of a wait-andsee attitude.”

‘Mapping out a strategy’

Trump’s tariffs on Mexico and Canada are not new. He imposed tariffs during his first term, in 2018, on steel and aluminum coming out of those countries. That led Mexico to impose tariffs on around $3 billion worth of American pork, steel, cheese and other goods.

Trump’s current tariffs could adversely affect exports to Mexico, said Ram Acharya, a professor with New Mexico State University’s Department of Agricultural Economics and Economic Business.

New Mexico was the 32nd-largest exporter of goods to Mexico and Canada in recent years, according to a fact sheet from the International Trade Administration. That largely includes electronics, metal products and oil and gas.

“In general, the impact of tariffs is that if we impose a 25% tariff on Mexico, they will find a way to impose tariffs on our products,” Acharya said.” Once they do that, our exports there would be expensive for Mexican consumers.”

Over the past decade, New Mexico has seen an increase in the amount of dairy products it has sent to Mexico, Acharya said. Other products being sent en masse are baked goods, sugar and corn, he added, making Mexico the biggest export country for New Mexico products.

“ It ’s substant ial ly increased since 2014,” Acharya said. “Maybe (dairy producers) will find domestic buyers and replace it. … I’m sure businesses are mapping out a strategy to manage the situation.”

But businesses like Gonzales’ The Fruit Basket ABQ and its vendors will have to wade through the tariffs, whatever they may be.

A vendor for The Fruit Basket ABQ, El Paso-based Quality Fruit & Vegetable Co., buys many products from Mexico distributors, including avocados, limes, peppers and tomatoes — which it then doles out to restaurants and stores across Albuquerque and El Paso.

The business is waiting to see how the tariffs will affect prices from their suppliers, who are spread across different Mexican cities. But if they do increase costs, Quality Fruit & Vegetable Co. will also have to pass those costs onto their customers, said Humberto Ureña, a buyer with the company whose focus is on products coming out of Mexico.

That puts the company in a tough spot — having to pay more for products coming over the border but also waiting to see if their customers buy less frequently.

“Normally (stores) order for the day 10 to 15 cases of avocados,” said Ureña. “They’re going to order now seven or five; it all depends on the sales they have.”

The Fruit Basket ABQ, outside of typical Mexican produce like limes, avocados and tomatoes, also sells dried goods from Mexico — about half of which come from across the border — such as crushed chiles and dried fruits.

He said last week, a case of about 48 avocados was $65. That increased to $85 this week.

“We already know what’s coming,” said Gonzales, the general manager of the North Valley grocery store. “We’re going to have to scale down on our ordering. We’re definitely going to have to raise prices, and that might, in return, lower sales.

“People might not buy as many avocados. They might hold off on the guacamole or putting limes in their beers.”

Matthew Narvaiz covers the economy for the Albuquerque Journal. You can reach him at mnarvaiz@abqjournal.com.