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What’s New This Week

Good morning, this week’s Power Courier unpacks the shifting forces shaping trade, economics, and business strategy in North America. With a tariff freeze in place, questions remain about whether this marks a shift toward stability or just another temporary pause in trade tensions. Meanwhile, as recession fears loom, businesses and investors are assessing their next moves. And with the peso-dollar exchange rate fluctuating, border economies are feeling the ripple effects—both good and bad.

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Trade Winds

The Tariff Freeze and the Road Ahead

The latest tariff freeze until April 2 highlights just how fluid—and political—U.S.-Mexico trade policy can be. Effectively, this pause extends a temporary halt on tariffs imposed under the Trump administration, underscoring tensions between free trade commitments under the U.S.-Mexico-Canada Agreement (USMCA) and the reality of persistent tariff threats.

A Temporary Reprieve

Certain tariffs that had been in place or threatened are on hold, giving businesses on both sides of the border a short window to plan without additional costs. Yet this pause hinges on ongoing negotiations that could either extend or abruptly end the freeze. For importers and exporters, the uncertainty creates planning challenges despite the momentary relief.

USMCA’s Intent vs. Current Practice

USMCA was designed to eliminate barriers and create a stable environment for North American trade. It offers extensive exemptions for goods moving between the U.S., Mexico, and Canada, theoretically negating the need for tariffs on covered products. However, the very existence of a tariff freeze points to a paradox: why suspend tariffs that should not apply in the first place if a free trade agreement is being honored?

This contradiction arises from the Trump administration’s broad use of national security arguments (Section 232) to impose duties on steel, aluminum, and other goods. These measures often clashed with the spirit of free trade commitments, generating legal and diplomatic friction that lingers today.

A Shift from the Trump Approach

By maintaining the freeze, the current administration seems to be stepping away from the “tariff-first” strategy. Under President Trump, punitive duties were used as a bargaining chip against adversaries and, at times, key allies like Mexico and Canada. Although this tactic sometimes secured concessions, it also produced instability that harmed long-term investment and trade flows.

Now, halting these tariffs—especially on goods already exempt under USMCA—can be seen as a partial reset. It acknowledges the unsustainability of imposing duties in direct conflict with a trade deal’s core objective: mutual exemption. Still, this freeze doesn’t fully remove the possibility of tariffs returning.

What Happens After April 2?

The looming question is whether the U.S. will let the freeze expire or make it permanent. If it ends, renewed tariffs could disrupt supply chains and potentially trigger retaliation from Mexico—a situation that USMCA’s dispute-resolution mechanisms would then have to handle. If the freeze is made permanent, it would reinforce confidence in the USMCA framework and support the premise of reduced barriers and predictable trade.

Ultimately, the tariff freeze serves as a test of how committed the U.S. remains to the principles of free trade. With April 2 on the horizon, businesses, investors, and policymakers await clear signals that stability and transparency will prevail. After years of back-and-forth, a consistent, rules-based approach may be the surest path to prosperity on both sides of the border.

Power Move

Riding Out the Storm—Navigating a Potential Recession

A recession can sound intimidating, but it’s simply a period of economic slowdown, usually marked by reduced consumer spending, business cutbacks, and rising unemployment. When these factors line up for months—or even years—we experience this downturn in full force. While headlines often dramatize the concept, it’s crucial to understand that a recession doesn’t appear overnight, nor does it mean the end of opportunity.

From my vantage point—shaped by decades of working on cross-border transactions between the U.S. and Mexico—I’ve seen how such downturns don’t respect borders. When consumer confidence slips in the U.S., the demand for Mexican exports (like manufacturing components and agricultural products) follows suit. This triggers layoffs and slower production, which in turn feeds back into the U.S. economy. One market’s pain can ripple outward, affecting businesses and families on both sides.

Still, a recession doesn’t have to be purely negative. In fact, it can spark innovation and strategic pivots. I’ve watched several cross-border companies diversify their revenue streams or streamline their operations during tough times, often emerging stronger. They anticipated shifts in currency values, renegotiated supply chain contracts, and built financial buffers for flexibility. If you’re a small or medium-sized business, now is the time to assess cash flow and customer credit risks. For families, focusing on essentials and setting aside an emergency fund can make a huge difference.

While we may not predict every twist and turn, we can prepare. Staying proactive—informed about policy changes, market signals, and cross-border dynamics—allows us to adjust strategies before a recession fully sets in. By recognizing potential issues early and treating them as opportunities to innovate, you can transform a daunting slowdown into a strategic advantage.

The Border Buzz

The Peso vs. The Dollar—How Currency Fluctuations Shape Border Economies

For those living along the U.S.-Mexico border, the peso-dollar exchange rate directly impacts daily life—influencing shopping habits, investment decisions, and regional commerce. This relationship creates complex economic effects that ripple through communities on both sides of the border.

How Currency Strength Affects Border Communities

When the U.S. dollar weakens and the Mexican peso strengthens, an interesting economic dynamic unfolds:

For Mexican Shoppers

A stronger peso might initially seem beneficial, but the reality is more nuanced:

When the peso strengthens:

• A Mexican shopper needs fewer pesos to get the same amount of dollars

• Example: At 16 pesos per dollar, they need only 1,600 pesos for $100 USD (compared to 2,000 pesos when the rate was 20:1)

• Key challenge: While the conversion looks favorable, their peso-based income doesn't stretch as far in dollar terms

This leads to fewer Mexican consumers crossing the border to shop, negatively impacting U.S. border cities like San Diego and El Paso where many businesses rely on cross-border customers.

For U.S. Businesses

When the peso weakens:

• U.S. businesses importing from Mexico benefit

• Example: A 50,000-peso shipment from Nogales costs $2,500 USD at 20 pesos per dollar

• If the peso weakens to 22 per dollar, that same shipment costs only $2,273 USD

• This makes nearshoring more attractive as manufacturing in Mexico becomes more cost-effective

Strategic Opportunities

Currency fluctuations create both challenges and opportunities:

• Investment potential: When the dollar weakens, U.S. companies can invest more effectively in Mexico

• Real estate and industrial growth: Cities like Tijuana, Monterrey, and Nogales often see expansion

• Cross-border workers: Those earning in dollars but spending in pesos benefit when the peso weakens

Adapting to Currency Shifts

Successful border businesses adopt flexible strategies:

• Pricing products in both currencies

• Hedging against currency fluctuations

• Adjusting to changing labor costs

The border region has always required economic adaptability, and understanding the peso-dollar relationship is crucial for anyone engaged in cross-border commerce—from individual shoppers to major corporations and policymakers.

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