If the US customs whip whips Mexico and Canada, several dozen Finnish companies will also suffer.
The future president Donald Trump has threatened all imports with 10-20 percent tariffs in the past, but now the talks have intensified so that all imports from neighboring Mexico and Canada would be subject to 25 percent tariffs.
Dozens of Finnish companies operate in Canada and more than 40 in Mexico. They would remain behind the customs wall.
Production or other operations have been moved to the United States’ neighbor for many reasons. Directly or indirectly, the location decision has been influenced by the proximity of the huge US market and, on the other hand, especially the salary level in Mexico.
Now the calculations have to be done again.
– It can be predicted that the risk management assessment will intensify again. Ynnälasku thinks about the benefits and risks of investing a new operation in Mexico, says the director of the Central Chamber of Commerce Päivi Pohjanheimo.
Pohjanheimo served as Finland’s ambassador to Mexico last year.
Finland’s big neighbors in the United States
There are enough Finnish companies operating in Mexico. According to the Confederation of Finnish Business, at least Kone, Nokia, Vaisala, Cargotec and Kemira are at the top.
There are also familiar names in Canada: Wärtsilä, Nokia, Metso, Kemira, Wihuri Wipak, Elomatic and Cimcorp.
Mexico has received investments and jobs when European and Chinese companies have also brought their production close to the large US market. Because of the better supply of labor, industry has been brought to Mexico rather than the United States.
The fact that Mexico and Canada have concluded trade agreements with the United States has also been of great importance.
The NAFTA free trade agreement between the United States, Mexico and Canada was renewed five years ago, during Trump’s first term as president. Then Trump characterized the new agreement as the best trade agreement in history.
Mexico and the USA are dependent
The economy and production of Mexico and the United States are strictly interdependent.
– Just about no product, item, tool or instrument ends up being sold on the US market without some part of it being innovated, designed and especially manufactured on the Mexican side of the border, says Pohjanheimo.
A customs wall can therefore be expensive for US companies and consumers. The former ambassador reminds us that “the world can hold a lot of talk and actions are decisive”.
Pohjanheimo emphasizes that even Finnish companies do not use Mexico only as a stepping stone to the US market.
Mexico’s market of 130 million inhabitants is therefore important, but in addition to that, Mexico’s location is also an advantage when looking south.
Mexico and Canada – US oxygen
Director of International Trade of the Confederation of Finnish Business Timo Vuoren compared to Canada, more Finnish companies are connected to Mexico and its production lines are also used for the US market.
The number of Finnish companies is larger in Mexico, but the role of Canada should not be underestimated.
– Mexico is the oxygen of cheaper labor, and Canada is the oxygen of higher technology, Vuori summarizes the differences between the two countries from the perspective of the United States.
Companies can avoid the tariff if they can expand their potential US production, but it won’t be easy – not least because of the four-year presidency.
– Often the business operations of companies are so trimmed that overnight there is no way to increase production capacity from there to the US side.
The cost of a tariff wall: a couple of tons for the US consumer
The impact of the customs wall was already experienced in Trump’s first term.
According to Vuori, the increased tariffs raised prices so that the bill for the US consumer was $2,000 a year. According to him, the immigrants brought about 300,000 jobs to the United States, but the same number were also lost.
– The total effect of customs duties was plus or minus zero.
According to Vuori, some companies or industries can be forced by tariffs to increase jobs in the United States. However, it weakens the competitiveness of the industry operating in the United States.
Pohjanheimo of the Central Chamber of Commerce is not quite convinced that Trump’s speeches about tariffs would come true as they are. EK’s Vuori is also suspicious.
He believes that Mexico and Canada will seek a negotiated solution to the tariffs.
– Trump hits the hardest card on the table and then sees what the reactions of the other parties are and what kind of trade policy poker is going to be played here.