This Week in The Rising Tide and Barber's Mexico Business Report

Here's a recap (summarization) of what we published in The Rising Tide on Sunday and Barber's Mexico Business Report on Monday, our two weekly newsletters. As you can see, there's a lot of weighty content here to be digested, news you can use. For full content access, subscribe on Substack. (You will not get that here on LinkedIn.)

Trump’s Tariff Plan Risks Inflation Surge

President-elect Donald Trump's proposed tariffs—25% on imports from Canada and Mexico and 10% on Chinese goods—threaten to spike U.S. inflation, reversing recent progress. Economists predict consumer prices could rise by up to 1%, diminishing purchasing power by over $1,000 per household annually. The proposed tariffs could also prompt retaliatory measures from trading partners like Mexico, further straining global trade.

Industries reliant on cross-border supply chains, such as automotive, agriculture, and consumer electronics, would face significant price increases. For example, car prices could rise by an average of $3,000 due to higher costs for imported parts and vehicles. Fresh produce, crude oil, and consumer goods like laptops and smartphones would also see sharp price hikes, impacting American consumers' daily expenses.

Economists warn these tariffs could decrease U.S. GDP by 0.6% and reduce total employment by 1% by 2026. Additionally, the tariffs could disrupt border communities reliant on trade-related jobs.

Businesses Urge Customers to Buy Before Tariffs

Amid uncertainty over President-elect Donald Trump's proposed tariffs, companies are encouraging consumers to make purchases before prices rise. With tariffs as high as 60% on Chinese goods and 25% on imports from Mexico and Canada, businesses like AutoZone and Jolie Skin warn of inevitable price hikes. Retailers may pass these costs on to shoppers, potentially reducing annual spending power by up to $78 billion.

Trump's Tariff Plans Clash with Reality of Global Auto Industry

President-elect Donald Trump's proposed tariffs on Mexican, Canadian, and Chinese goods aim to boost American car production but overlook the global nature of the auto supply chain. With no car being entirely American-made, tariffs could sharply increase prices as manufacturers rely on imported parts, including those exempt under USMCA. While Trump claims tariffs will restore U.S. jobs, experts argue the costs will primarily burden consumers and take years to offset with domestic production.

China Prepares for New Trade War

Facing internal challenges like property debt and deflation, China is better prepared for President-elect Donald Trump's proposed tariffs. By reducing reliance on U.S. trade and diversifying export markets, Beijing has strengthened its resilience. Analysts expect China to counter through measured retaliation and bolstered domestic consumption, avoiding extreme actions like devaluing the yuan or selling U.S. Treasury bonds.

Auto Industry Faces Reckoning

After years of massive spending on electric and autonomous vehicles, automakers face economic uncertainties, slow EV adoption, and eroding profits. Companies like GM, Ford, and Stellantis are cutting costs through layoffs, restructuring, and strategic partnerships to recover profitability. Despite heavy investments, returns remain low, forcing the industry into a period of consolidation and efficiency-driven reforms.

EV Tax Credits in Jeopardy

The $7,500 federal EV tax credit, vital for bridging the cost gap between electric and gas-powered cars, faces possible repeal under President-elect Donald Trump. Analysts warn this could slash EV sales by 27%, while automakers and state leaders like California's Gavin Newsom push for alternatives to sustain demand and production.

Walmart Scales Back DEI, Sparking Corporate Debate

Walmart is scaling back its diversity, equity, and inclusion (DEI) programs, including phasing out key initiatives like supplier diversity and training through the Racial Equity Center. This shift reflects broader tensions in corporate DEI efforts and has been championed by "anti-woke" activist Robby Starbuck. Critics warn of negative signals to underrepresented groups.

U.S. New Business Applications Soar

New U.S. business applications hit a record in 2023, with nearly 5.5 million filings, reflecting a rise in entrepreneurial activity across regions like the Southeast and Mountain West. About 1.8 million of these are likely to hire employees, marking significant growth from 2018. States like Wyoming, Delaware, and Florida led the way in new business filings. Consumer interest in small businesses is also increasing, with 85% of shoppers planning to support them during the holiday season.

Renters Face Growing Financial Strain

Renters in the U.S. face significant financial challenges, with a median net worth of $10,400 in 2022, far less than the $400,000 net worth of homeowners. While home equity is a primary factor in homeowners' wealth, renters also struggle with lower income, higher debt, and limited savings. Those earning under $25,000 annually are especially affected, often being "cost burdened" by high housing expenses.

High School Graduation Rates Reach Record High

In 2022, the U.S. high school graduation rate hit a record high of 86.6%, up from 79% in 2011, according to the GRAD Partnership. This reflects significant progress in many states, including West Virginia, where the graduation rate rose by 14.7 points to 91.2%. However, some states, like Arizona, saw declines. The pandemic temporarily affected graduation rates, but overall, historically underserved groups, including Black, Hispanic, and Native American students, experienced larger gains compared to white students.

Trump's 25% Tariff Proposal Threatens Both Mexican and U.S. Economies

President-elect Donald Trump's proposal to impose a 25% tariff on imports from Mexico and Canada has raised concerns for both countries, with Mexico being especially vulnerable due to its reliance on U.S. exports. The tariffs could severely impact Mexico's automotive industry, which is responsible for 25% of North American vehicle production, with major automakers like Stellantis and Volkswagen facing potential financial losses. U.S. consumers could see car prices rise by $2,100, and American automakers would also face higher costs due to reliance on Mexican manufacturing.

Beyond automobiles, Mexico's agricultural industries, including avocado and tequila production, could suffer significant declines in U.S. demand, leading to potential job losses. Mexico’s economy could shrink by up to 4.4% as a result. The proposed tariffs also challenge the USMCA trade deal, with both countries’ economies heavily intertwined. While Trump argues the tariffs are necessary for border security, critics warn they could destabilize vital trade relations, highlighting the need for careful negotiation to avoid economic and political fallout.

Sheinbaum and Trump Pledge 'Good Relationship' Amid Trade and Migration Disputes

Mexican President Claudia Sheinbaum and U.S. President-elect Donald Trump agreed to maintain a "good relationship" after a friendly phone call. They discussed migration and drug trafficking but did not directly address Trump's proposed tariffs. While Trump claimed Sheinbaum agreed to stop migration, she emphasized Mexico’s policy of cooperation. The call helped strengthen the Mexican peso, but tensions with Canada remain, with Ontario's Premier criticizing comparisons to Mexico.

Canada Signals Willingness to Sideline Mexico in Trade Talks

As the U.S.-Mexico-Canada Agreement (USMCA) review nears, Canadian leaders, including Prime Minister Justin Trudeau, are considering a bilateral trade deal with President-elect Donald Trump, potentially excluding Mexico. Trudeau raised concerns about Chinese goods entering North America via Mexico, a claim Mexico denies, citing strong U.S.-Mexico customs coordination. Despite this, Canadian officials, including Finance Minister Chrystia Freeland, support the U.S. stance on Chinese trade practices.

Mexico Reassures Chinese Investors Amid U.S. Pressure

Mexican officials are working to reassure Chinese investors, despite increasing U.S. pressure to limit Chinese-funded factories. Santiago Toledo, a commercial counselor at the Mexican embassy in China, emphasized that foreign companies are treated as local manufacturers under Mexican law. Chinese investment in Mexico has grown as a cost-effective route to the U.S. market, but recent slowdowns are attributed to threats from President-elect Donald Trump.

Mexican Lawmakers Abolish Key Watchdog Agencies

Mexican lawmakers have voted to eliminate seven independent watchdog agencies, including the freedom-of-information institute, sparking concerns about democratic erosion under President Claudia Sheinbaum's administration. Sheinbaum defended the move, arguing that smaller agencies are sufficient for transparency, while critics warn it marks a shift toward autocracy. The Senate passed the measure 86-42, with state legislatures set to ratify it.

John Deere Defies Trump's Threats

John Deere is investing US$55 million in a new manufacturing plant in Nuevo León, Mexico, set to open in 2026. The plant will produce construction machinery for the Mexican market, despite former President Trump's threat of a 200% tariff on products from Mexico. This will be John Deere's first dedicated construction equipment facility in Mexico, joining existing operations in Coahuila and Nuevo León. Gecimar Morini, John Deere's manager for the region, emphasized the company’s commitment to long-term growth in Mexico.

Well, there you have it, amigos, a tasting of the entrees and sides of what we can offer week after week in both of our newsletters. Subscribe on the Substack links provided if you want the whole enchilda, only $7 a month or $70 a year. Holiday Special: Subscribe annually to one, and I will comp you for the other.