Mexican border cities are in limbo as tariff threats spark fears of a recession

Over the past year, however, President Donald Trump's threatened 25% tariffs against Mexico and Canada have plunged manufacturing hubs all along the northern Mexican border into limbo, a state that persists despite a one-month reprieve to which Trump agreed on Monday.

Tariffs would cripple Mexican border economies that are reliant on factories churning out products for the U.S. — auto parts, medical supplies, computer components, myriad electronics — and likely thrust the country into a recession, economic forecasters have warned. Some workers wonder how much longer they'll have jobs, while business leaders say the uncertainty has already led many investors to start tightening their purse strings.

"It's a conflict between governments and we're the ones most affected," said 58-year-old truck driver Carlos Ponce, leaning against his rig at the customs border crossing between Ciudad Juárez and El Paso, Texas. "Tomorrow, who knows what will happen?"

Ponce, who was driving a truck full of car shock absorbers, said he's spent the past 35 years moving goods across the border, just as his father did before him. Now, he's unsure how much longer that will last.

Manufacturing in export-oriented assembly plants known as maquiladoras are the heart of Ciudad Juárez's economy, with 97% of its goods going to the U.S., according to figures from Mexico's Economic Ministry.

The factories were born in the 1960s in an attempt to boost economic development in northern Mexico and lower prices for U.S. consumers. The maquiladora program later took off after the North American Free Trade Agreement, or NAFTA, was signed in 1994. The agreement was supplanted by a similar pact, the United States-Mexico-Canada Agreement, or USMCA, negotiated between the three countries during Trump's first term.

Today, neon signs with the dollar-to-peso exchange rate flash across the city, a reminder of the close ties binding both sides of the border.

"Everything that happens in the United States: its economic, social policy … directly affects us because companies here in Mexico depend on what they sell in the United States," said Thor Salayandia, head of his family's auto-parts manufacturing facility in Ciudad Juárez. "The United States also needs Mexico to keep manufacturing, but they're not seeing things like that."

This week, workers and business leaders alike breathed a sigh of relief when Mexican President Claudia Sheinbaum announced she had negotiated with Trump to delay tariffs one month.

"Now, we're buying time," Salayandia said.

Workers here assemble everything from auto parts to computer panels to T-shirts emblazoned with the American flag, logos of popular U.S. football teams and slogans such as "Proud to be a federal employee."

Parts can cross the border multiple times before the final product is sold to U.S. consumers. That economic interdependence has left many in the city struggling to imagine a future without it. One U.S. company said it would likely have to move part of its manufacturing in the city to the U.S., but at a sharp cost.

Antonio Ruiz, a compliance officer at Tecma, a U.S. firm that helps foreign companies set up shop along the border, said his was among a number of businesses to call emergency meetings over the weekend as economic forecasters warned that the tariffs could drive Mexico into a recession.

"It's very difficult to be prepared for something that has never happened before," Ruiz said. "As much as you want to prepare for it, the best you can do is prepare to brace yourself in the short term."

Salayandia and economists warn that any sort of tax could lead to cascading unemployment and rising prices on both sides of the border. In Mexico, they say, it could also spur a rise in violence in border areas by pushing the unemployed into the hands of drug cartels, as well as an increase in Mexican migration to the U.S.

Manuel Sotelo, a leader of Mexico's National Chamber of Freight Transportation who owns a fleet of trucks that cross the border every day, sees the tariff threats as more of a political power move than a future economic reality.

"Both countries would be paralyzed," said Sotelo, who sat at a desk covered with local newspapers carrying bold headlines on the tariffs, a Trump bobblehead positioned behind him. "Let's say he did slap a 25% tariff (on Mexico), what would they do during the Super Bowl without avocados?"

On the other hand, Sotelo acknowledges that the tariff talk has already inflicted some damage. He and other business leaders say that over the past year they've watched investment dip in Ciudad Juárez because of political uncertainty, as investors hesitate to funnel their money into businesses that could collapse with the stroke of a pen in Washington.

While Trump's election has been the primary driver of that uncertainty, June elections in Mexico and a controversial judicial reform carried out by Mexico's governing party have added to it. Sotelo said he saw a 7% drop in business last year, and only expects that to continue until lingering tariff threats are resolved.

One collective of maquiladoras in the city says it has seen at least three factories halt production.

"Every time we hear this discourse from political leaders, the people running our governments, it sends shock waves through the border," Salayandia said. "Because the border is a global thermometer. Our products go all over the world. Those companies will go look in other parts of the world where they offer conditions to keep competing."