Economy

How would a Trump victory affect Tijuana and the border?

From the exchange rate to nearshoring: how a Donald Trump term would transform the border economy and affect Asian companies and Tijuana's development

US presidential elections are scheduled to be held on Tuesday, November 5, which means they are less than a week away. US voters have two clear options: a continuation of the Democratic government that will lead to Kamala Harris becoming the first female president of the United States or going back to the recent past with former president Donald Trump, known for his incendiary statements, especially on immigration and border policy issues.

The big question up in the air is how would a Donald Trump victory affect Mexico, especially Tijuana, and the border economy dynamic? With his previous term as an example, here is some important context to see what the possible effects could be for the region.

Impact of the Trump presidency (2017-2021)

The presidency of Donald Trump affected border life in several ways, especially in communities like Tijuana and San Diego where daily flow between nations is essential for the economy, culture, and social and family relationships. It should be noted that many of the toughest measures were related to the COVID pandemic that affected most of his presidency. However, some of the most outstanding examples are:

1. The Remain in Mexico program. This program forced asylum applicants to remain in Mexican border cities while their cases were being verified in the United States. This made the number of immigrants increase in cities like Tijuana impacted local services and resources.

2. Border crossings became stricter. Longer waiting times and a higher level of security impacted tourism on both sides of the border. However, it should be mentioned that crossings were also affected by COVID protective measures.

3. Construction and expansion of the border wall. One of Trump's main policies was the expansion of the border wall. This transformed the physical and symbolic landscape of the region, affecting perceptions regarding the border.

4. Dangerous rhetoric. Trump's statements about immigrants negatively impacted public perception, contributing to the rise of discriminating acts against Latino communities in the border and the United States. For many Tijuana natives and people living in the border, this resulted in a higher level of hostility and surveillance.

How could a Donald Trump victory affect the border in 2024?

Peso and rising value of the dollar

US presidential elections tend to significantly impact the Mexican peso, especially if markets perceive instability. If Trump wins, the Mexican peso could depreciate as markets would seek to protect themselves with stronger currencies. Meanwhile, strict policies could discourage the flow of remittances (a significant source of revenue for Mexico), indirectly affecting the peso.

It should be noted that every time US elections occur (regardless of the results), the peso becomes vulnerable to these factors. The peso’s value can change depending on the results, especially if significant binational policy changes are on the horizon.

Francisco Campos, Chief Latin American Economist at Deutsche Bank. said that they have a "a very cautious vision". He also said the dollar could be sold at 19 pesos if Kamala wins, and 20.50 pesos if Trump wins. Besides, Trump has proposed tariffs on American companies that move their production to Mexico.

For his part, the Deputy Secretary of Finance, Edgar Amador, told newspaper El Financiero that the peso and most currencies in the world are always subject to change during US elections, which means, the peso would be affected. In fact, Grupo Financiero BASE has also stated that if Trump wins the elections, the dollar will cost 20.50 pesos.

Why would the price of the dollar increase?

The price of the dollar will not really increase, instead, Mexican currency would lose some of its value if Donald Trump wins the presidency and carries out his plans. This would also affect Mexico's stability and stop foreign investment. According to Forbes, if Donald Trump were to keep all of his campaign promises, the Mexican economy would dip into a recession.

What are Donald Trump's promises?

If his promise of massive illegal immigrant deportations and strengthening of border security is carried out, this would affect border crossings and trade and increase export waiting times and make them more expensive. In addition, massive deportations would impact families in Mexico that depend on remittances sent by their relatives in the US. Around 10.7 million Mexicans, of which 5.1 million could be there illegally, are estimated to live in the United States.

The closure of the border and the increase of inspections at border crossings would make Mexican export transport more expensive, limiting its growth. This would also negatively affect diplomatic relations between both countries, as 44% of direct foreign investment in Mexico comes from the United States.

Another concerning fact is that the USMCA is scheduled to be reviewed in July 2026. However, Trump has suggested he would completely renegotiate the deal, which means that the treaty could be modified in important key aspects. Currently, Mexico is the United States' main trading partner. S. All of these factors affect the economy of Mexico and could result in the depreciation of the Mexican currency against the dollar.

Nearshoring

In Mexico, nearshoring has become an important issue, especially in northern states like Coahuila and Nuevo León as they are pillars of the electronic and automotive industries. American corporations hire Mexican services and providers due to geographical proximity, which allows them to take advantage of a more affordable workforce and services. However, Donald Trump has stated on several different occasions that he would force these companies to come back to America, so that all of their production earnings and jobs stay in the US. This would result in job losses in Mexico.

In addition, Donald Trump has warned that he is open to applying tariffs of 100% to 200% on Chinese cars made in Mexico to stop their sales in the United States. However, he has been less specific in his most recent statements and has suggested that tariffs could apply to all car imports from Mexico.

Asian investment at the northern border

The Mexican northern border region, especially Tijuana, has experienced high levels of foreign investment in the last few decades, mainly from Asia. According to a diplomat, Tijuana is home to more than 40 Chinese companies, including Hisense, a renowned multinational tech corporation. Japanese companies have also established in Baja California to manufacture electronics, automotive pieces, and medical devices. Investment from South Korea and other Asian countries has also resulted in factories, production lines, and distribution centers being built in cities like Tijuana, Ciudad Juárez, Saltillo, and Monterrey.

Thor Salayandía, president of the Border Business Block, shared that Trump's announcement regarding possible tariffs has created uncertainty in Mexican automotive and maquiladora industries' value chain. This threatens both assembly companies and providers of auto parts and components. This situation could directly affect local economies, as thousands of jobs depend on the production and export to the United States.

Impact on jobs and the regional economy

Mexico significantly depends on trade with the United States as more than 80% of its exports are sent to this country. The Mexican automotive industry contributes around 4% of the national Gross Domestic Product (GDP) and represents 20.5% of the country's manufacturing economy, according to the Mexican Automotive Industry Association (AMIA). Just in Ciudad Juárez, the automotive industry employs more than 67,000 people.

In the northern region, which includes cities likes Tijuana and Matamoros, around 183,000 families depend on the automotive and auto part industry. Nationwide, the industry employs more than 12 million people directly, according to IMSS. Trump's possible victory and his protectionist policies could result in the loss of thousands of jobs in these cities, where the economy is highly dependent on the maquiladora industry.

For the economy of Baja California and other border states, the threat of tariffs would not only affect big corporations, but also the domestic economy of thousands of workers that depend on the maquiladora industry. In Tijuana, where Asian investment has been key to the region's development, a change in US trade policies could slow down development and leave companies and workers with no direction.

New controversies prior to the 2024 presidential election

Trump has added another controversy to his list of scandals by being accused of gender-based violence. In an event with Tucker Carlson, Trump said that former Republican Congresswoman Liz Cheney should have "barrels shooting at her" to see how it feels to send troops to war.

This statement has been widely criticized by the White House and Democrat candidate Kamala Harris, who reiterated that anyone sending such messages is not qualified to be president.

In addition, Arizona Attorney General, Democrat Kristin Mayes, announced on Friday that her office is investigating whether former President Donald Trump’s violent remarks about former GOP Rep. Liz Cheney broke the law.

Don't forget to follow our live coverage of the US presidential elections on November 5th.

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