Background on Gilberto Lozano and Roland Berger
Gilberto Lozano, a senior partner and director in Mexico for the German consulting firm Roland Berger, highlighted Mexico’s lower logistical costs and integration of certain sectors into value chains, such as the automotive industry.
Understanding US Tariffs and Their Impact
US tariffs are applied to the import price, not the final product price. With a 50% difference between US and Mexican tariffs, assuming non-compliance with the T-MEC rules, a 12% import tariff equates to 6% on the shelf product.
- Tariff Analysis: The Cato Institute’s analysis in April showed that the average effective tariff rate in the US was 17.8%, the highest since 1933, even after adjustments for consumer behavior.
- Business Control: Businesses can control labor costs, supply chain integration, and product pricing.
- Productivity Improvement: Only one in four companies has implemented programs to improve operational efficiency and productivity in Mexico.
Lozano emphasized that there is significant room for cost reduction and increased productivity, which can absorb tariff implications or boost profit margins.
Mexico’s Competitive Advantages
Historically, Mexico and Latin America have not operated with the highest productivity standards, leaving ample room for cost-competitive production improvements.
- Productivity Efforts: Focus on cost control and adopting new technologies or business practices.
- Strategic Improvement: Significant result optimization and sustained competitiveness enhancement are possible with strategic utilization of available improvements.
Lozano urged the Mexican productive sector to take advantage of available tools and actions.
Labor Costs and Logistical Advantages
Mexico’s labor costs average around 40% less than in the US, according to Roland Berger. Additionally, Mexico’s lower logistical costs and integration into value chains, like the automotive industry, provide further advantages.
Potential Tariff Reduction
The Consejo Empresarial Mexicano de Comercio Exterior, Inversión y Tecnología (Comce) analysis suggests that if the US administration reduces migration and fentanyl-related tariffs from 25% to 12%, Mexico’s weighted tariff would drop to 8.4%. This would position Mexico among countries with the least exposure to US trade protectionism globally.
The US employs tariffs as part of a commercial and political strategy, protecting sensitive sectors like steel, aluminum, and automobiles or using them as a source of fiscal income or geopolitical pressure, especially against China.
