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What could a border wall and tax on Mexican imports mean for Colorado's trade economy?

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Posted at 4:35 PM, Jan 27, 2017
and last updated 2017-01-27 18:35:25-05

DENVER – Trade experts say they’re concerned about the Trump administration’s relationship with Mexico and its potential effects on businesses and consumers in Colorado.

In his first week in office, President Donald Trump signed an executive order authorizing construction of a wall along the United States’ border with Mexico. He also doubled down on his assertion that Mexico will pay for it. On Thursday, a spokesman for President Trump said one option for funding the wall’s construction could be a 20 percent tariff on imports from Mexico.

Mounting tensions between the two countries and a proposed tax on imports have the potential to negatively affect Colorado’s economy. Mexico is Colorado’s 2nd biggest export destination and 3rd biggest source of imported goods, according to the World Trade Center Denver.

World Trade Center President Karen Gerwitz told Denver7 she is “absolutely concerned” about Trump administration officials’ statements on Mexico.

“These tariffs and a proposed wall will have numerous negative consequences between us and our second largest trading partner,” Gerwitz said. Mexico has more free trade agreements than any other country, Gerwitz said, and could decide to trade with those nations instead of the U.S., dealing a blow to Colorado businesses that rely on imports and exports.

Colorado imported more than $1.7 billion worth of goods from Mexico in 2015, according to the World Trade Center. More than half of that was industrial machinery and computers.

“Not only will it impact our companies' supply chains for importing components for more advanced products that we produce, the cost of increased tariffs will be borne by consumers,” Gerwitz said. That tariff would likely be passed on in the form of higher prices.

One example of a business sector that could face hardships and higher prices is the beef industry, Gerwitz said. Between breeding and slaughter, cows can cross the U.S.-Mexico border several times. Cattle ranchers often import semen from Mexico to impregnate their cows, Gerwitz said. The offspring are raised in the U.S., then sent to Mexico for slaughtering and processing before being sent back to the U.S. as meat ready for sale. With higher tariffs in place, the entire process would become more expensive.

A spokesperson for the Colorado Office of Economic Development and International Trade said in a statement, "Currently, we are reviewing executive orders and actions that the new Administration is taking and evaluating them with our federal partners to understand what the implications may be. We cannot speculate at this time what, if any, economic impacts there will be."

In a news conference Friday, President Trump said the United States and Mexico continue to have a strong relationship but changes are necessary to secure the border and close the almost $60 billion trade deficit.

The White House released a joint statement from President Trump and President Pena Nieto that said the two leaders spoke on the phone for about an hour Friday and that “both presidents have instructed their teams to continue the dialogue to strengthen this important strategic and economic relationship in a constructive way.”

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