Missouri’s second-largest trade partner is Mexico; but tariff talk causes uncertainty

Feb 17, 2017

Mexico purchased $2.56 billion in Missouri goods in 2016.

That’s second only to Canada, Missouri’s top export partner, which spent $5.2 billion last year.

“Exports are important for a variety of reasons, and in terms of our manufacturers it’s critical,” said Ann Pardalos, the head of the state's International Trade and Investment Office.

A part of the Missouri Department of Economic Development, Pardalos’ agency works to help small manufacturers and service providers look at global markets. One way they connect businesses to international markets is through trade fairs, including the Expo Manufactura held in Monterrey, Mexico, last week.

That trip included six Missouri businesses.

One of them was Chesterfield-based Holtec Gas Systems, which manufactures nitrogen gas generators. The company exports to 35 countries, but owner and founder Thorstein Holt said Mexico accounted for 10-15% of their revenue last year.

And while he said the Missouri-sponsored trip went very well, the business owner worries about future sales to Mexico.

That’s as President Donald Trump talks about a wall between the two countries and a possible 20% tariff on Mexican imports to pay for it. That would be a sharp change from the North American Free Trade Agreement enacted in the 1990s, which lifted trade barriers.

Such a move would likely mean a retaliatory tariff on American goods, and Holt said Europe is making moves to step up its exports to Mexico.

So Holt is exploring his options.

“If you’re going to do business in Mexico, we may have to move our operations to Mexico,” Holt said. “So instead of employing people from Missouri, we may have to employ Mexicans in Mexico.”

Right now the company has 14 employees.

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Holtec Gas Systems is hardly the only St. Louis-area company that does significant business in Mexico.

Metal Exchange Corporation has more than 100 employees in Westport Plaza. The company, founded in 1974, sells aluminum and copper in about 30 countries.

Vice President of International Business Development, Mike Kelley, said Mexico has become a big customer since NAFTA went into effect in 1994.

“We’ve seen them become more sophisticated. They need more of our product and we’re supplying more product there,” he said.

So, the aluminum sheets that Metal Exchange Corporation sells to Mexican businesses go into aluminum cans, automobile wheels and pop-out pill packaging.

But Kelley said any tariffs will make doing business in Mexico harder.

“And the net result of that is we’ve got less volume and less ability to employ people here in St. Louis to keep that business going,” he said.

What’s more, Kelley said if costs go up for raw materials, such as aluminum and copper, costs will be passed along in the final products. So an aluminum sheet sold to a Mexican wheel manufacturer will lead to a more expensive car in the U.S.

“The cost of living in the U.S. is going to go up,” he said, “because the cost of the product is going to cost more than it does right now when there literally is no barrier between us and Mexico other than transportation costs.”

Among Missouri’s biggest exports to Mexico are industrial machinery, vehicles, cereals and electric machinery.

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