05-01-2025
Roberto Salinas-León, an economic analyst, Purdue PhD alum and president of the Mexico Business Forum, dissected the high-stakes debate over U.S. tariff policies under the current presidential administration at the April Purdue University Research Center in Economics’ (PURCE) economic policy luncheon. The special guest speaker framed the debate as a tension between pragmatic bargaining tactics and ideological conviction.
With U.S.-Mexico trade exceeding $839 billion annually and deeply integrated supply chains spanning auto manufacturing, agriculture and technology, Salinas-León argued that the wave of tariffs announced on "Liberation Day,” especially on automobiles, autoparts, steel and aluminum, risk destabilizing North America’s economic and institutional ecosystem while failing to address core challenges of job displacement and innovation.
Salinas-León, an adjunct fellow at the Cato Institute who has testified before Congress on NAFTA and free trade, questioned whether tariffs are a strategic lever to renegotiate trade terms under the United States-Mexico-Canada Agreement (USMCA) — set for review in 2026 — or are rooted in a decades-old skepticism of globalization.
He criticized the “ideological bias” for tariffs, with its roots going back to the early opposition to globalization during the Reagan years, noting that the bias emerged from the political right and was echoed by figures like Pat Buchanan and Ross Perot. Both warned that trade liberalization would lead to job losses and manufacturing disruption. He also took issue with Peter Navarro’s push for bilateral trade surpluses and reshoring manufacturing, since these ignore comparative advantage principles. For example, Mexico’s tomato exports — hit by abrupt 20% tariffs — highlight the inefficiency of disrupting supply chains for politically driven goals. Meanwhile, U.S. services trade surpluses ($300 billion globally) underscore the mismatch between policy and economic reality.
Since NAFTA’s 1994 implementation, cross-border supply chains have become “profoundly integrated,” with auto parts, electronics, even oil crossing borders multiple times before the final product reaches the market. Salinas-León noted that 80% of Mexico’s exports go to the U.S., while 15% of U.S. imports originate in Mexico. These include agricultural products like avocados, blueberries, tomatoes and mangoes; manufacturing products such as auto parts, appliances, and aerospace components; and finally, energy. Pemex, the Mexican state-owned oil and gas company, sends its crude oil to Houston for refinement before it is re-exported to Mexico.
Salinas-León said that tariffs, which other economists call taxes, raise consumer prices and strain industries reliant on just-in-time production. He warned that reshoring manufacturing to the U.S. ignores logistical efficiencies and would require costly taxpayer subsidies to offset higher labor and operational expenses, as not all agricultural products can be efficiently produced to meet U.S. consumer demand.
When asked about shuttered auto plants in Indianapolis, Salinas-León emphasized that the city’s pivot to pharmaceuticals, tech and services demonstrates how regions can thrive post-manufacturing. Rather than blaming trade, he advocated for policies to ease transitions. He acknowledged the real pain of job disruption for sectors of the population. He said leaders should create social safety nets such as expanded unemployment insurance and retraining programs to help workers be resilient as industry changes. He paralleled trade-driven job losses with impending AI disruption, urging proactive measures to mitigate displacement without stifling innovation.
Salinas-León favors strengthening USMCA by creating a customs union with shared security standards, open-skies agreements and streamlined border procedures. By treating North America as a single economic bloc — akin to interstate trade within the U.S. — policymakers could reduce bureaucratic friction and amplify competitive advantages.
His solution centers on the idea of transforming the U.S.-Mexico border region into a special economic zone with the free flow of all factors of production — including labor, not just goods and capital. He suggests that this approach would allow for more seamless movement of people, similar to how goods and capital already move across the border in certain cities where individuals cross three, four, or five times a day regardless of citizenship. Salinas-León envisions this special economic zone as part of a broader strategy to deepen North American integration, proposing that infrastructure, capital markets, and especially human capital should be integrated to maximize the benefits of free trade for both countries.
He argues that such a policy would not only address immigration challenges but also enhance economic competitiveness and resilience, moving beyond restrictive or punitive approaches.
Salinas-León’s analysis indicates that tariffs are a blunt instrument ill-suited for modern, interconnected economies. Instead of resorting to protectionism, he says leaders must foster resilient investment climates and embrace adaptive policies to navigate both trade and technological shifts. His vision of a unified North American market — rooted in data-driven pragmatism — offers a blueprint for sustainable growth amid global uncertainty.
