After delay, tariff threat looms over San Diego's regional economy
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The U.S. agreed to a month-long delay of tariffs against Mexico and Canada on Monday, but the looming threat of the 25% levies could deliver a major impact to California's economy.
Why it matters: The tariffs, if implemented as described before Monday's pause, would have an estimated $32.6 billion economic impact in the state, per research from Trade Partnership Worldwide based on trade from January to November 2024.
- That's more than any other state except Texas, where there's a projected $47.1 billion economic impact.
Catch up quick: Trump this weekend announced 25% tariffs against goods from Mexico and Canada, with a lower 10% tariff on Canadian energy and new 10% tariffs on Chinese imports.
- The ensuing delay followed Mexico agreeing to send 10,000 troops to the border to combat fentanyl trafficking and the U.S. saying it would help prevent gun trafficking to cartels.
- Canada announced it reached a similar deal in the afternoon.
What they're saying: "Instituting tariffs will have dire consequences on our region's highly developed integrated supply chain, adversely affecting our local manufacturing and trade-related jobs," said Jessica Anderson, the interim CEO of the San Diego Regional Chamber of Commerce.
- "Taxing imports is a tax on American businesses and U.S. customers — the end users of these products."
Zoom in: Calibaja — the megaregion including San Diego and Imperial counties and the state of Baja California in Mexico — is the largest economic zone along the border.
- It has a regional GDP of $250 billion, with estimated cross-border trade flows of $70 billion, according to a 2022 study from University of San Diego's Ahlers Center for International Business.
- The region is a manufacturing powerhouse in audio and visual equipment, medical devices and semiconductors.
What's next: With the tariffs delayed, the Otay Mesa Chamber of Commerce is holding an emergency webinar Friday to inform businesses of mitigation options, legal challenges and the future outlook.
The bottom line: Nikia Clarke, the chief strategy officer of the San Diego Regional EDC, which oversees the World Trade Center San Diego, said this could be a volatile period for North American supply chains.
- "Here in San Diego, from medical devices to semiconductors and consumer goods, our supply chains are so integrated that 40% of what we import from Mexico was made by American workers in the first place," Clarke said.