Trouble in Tariff Town

During the mid-80s, I spent a bit of time following Texas billionaire H. Ross Perot around Texas as he tried to reform the state’s nearly pathetic public education system. The Dallas businessman flew his private jet into towns all across the state and took public testimony from teachers, administrators, students, and, yes, football coaches. Perot had been charged by Texas Governor Mark White with promoting and developing an educational reform package called HB 72. The most controversial element of the measure came to be known as “No Pass, No Play,” which meant if students did not maintain passing grades they were not allowed to participate in extracurricular activities, an existential threat to football, the national sport of Texas, A collective tremble passed across the land, but the reforms were all adopted by the predominantly Democratic legislature.

Perot was, justifiably, proud of his input and participation, though the attempt to equalize funding for public schools, named “Robin Hood,” had varied impact. The idea was to take money from wealthy districts and share it with the poorer communities. Equal education was memorialized in language of the state’s constitution, but, like many things Texan, was a weak aspiration. The first lawsuit challenging those financial inequities was filed in 1969, Rodriguez v. Board of Education, and the state has been endlessly in and out of court since then, including after HB 72. A child born into a poor or rural school district in Texas continues to be disadvantaged by a shortage of resources. None of this has stopped the current governor from taking taxpayer money away from public schools and offering it up to private, mostly Christian operations. He has promised teachers pay raises and property tax reform for homeowners, but none of that has happened and the legislature is down to its last few weeks of meeting.

Perot enjoyed his transition from businessman to educational and economic expert. He had ideas, and worked to see their implementation, which is the role of executives. Politics, of course, and government, are different games. Leadership is not simply about firing off orders and demanding execution. It’s a tortured endeavor that requires consensus building and, usually, moving public opinion. A difficult adjustment for Perot, he, nonetheless, began interjecting himself into national issues. His fame originated, mostly, from appearing on TV with homey charts and graphs that criticized the North American Free Trade Agreement (NAFTA), which, essentially, opened the U.S., Mexico, and Canadian borders to commerce (mostly) without tariffs. Perot famously said the overwhelmingly significant result would be a “giant sucking sound” of American jobs heading south of the border.

The attention he got on national TV news and his paid network appearances changed the course of modern American political history. Perot inserted himself into the 1992 presidential election as a third party candidate and when he earned 19 percent of the vote, he ended the reelection dreams of President George H.W. Bush, and, effectively, made Bill Clinton a Democratic president. Perot’s vote totals as a third party candidate were the most since Teddy Roosevelt in 1912, and it was largely the result of voters worried about the economy, trade, and jobs, the tired old American mantra. The economy, undeniably, boomed under Clinton as the Dot Com era brought a surge of venture investments and a proliferation of internet startups.

Perot, though, was largely correct. Jobs migrated from the U.S. to Mexico and the major automobile manufacturers built plants to take advantage of cheaper labor, which increased profit margins when vehicles were shipped across the border without tariffs. There were some restrictions on car and truck builders under NAFTA. For instance, 62 percent of parts had to be created in the U.S., but the upside for revenue, supporters insisted, more than offset those constraints. Multi-national corporations from around the world began to relocate to Mexico to “near shore” their production to the lucrative American markets and that helped to create jobs on both sides of the Rio Grande. Wages stagnated for low-skilled workers in this country, however, and we developed a major trade deficit with Mexico. In 1993, the U.S. had a trade surplus with Mexico, but a deficit in recent years has risen to over $100 billion dollars.

The economy of the U.S.-Mexico border slowly boomed in the years after the adoption of NAFTA. Maquiladora plants began to proliferate on the Mexican side of the big river when American companies realized that parts could be made and assembled there by cheap labor and shipped without tariffs to buyers in this country. In Ciudad Juarez, just across from El Paso, as of 2025, maquiladoras employ about 330,000 workers in low wage jobs. An estimated 97 percent of their goods are exported to the U.S. in the automotive, electronics, and medical device sectors. With the imposition of Trump’s 25 percent tariffs on Mexico, however, economists indicate that an estimated 45,000 jobs have already been lost in Juarez, a reduction that also begins to draw down the energy of El Paso’s economy. There has been a 40 percent decline in the amount of exports northbound out of Juarez.

Trump’s tariffs are slowly squeezing the vibrancy out of the border economy. Job losses won’t just be in Mexico. The city of El Paso and El Colegio de la Frontera Norte recently did a study that reveals about 12,000 individuals commute daily across the river into Texas for jobs, many of them in the manufacturing sector. A total of 2400 professionals and managers travel from El Paso to Juarez each day for employment, often in managerial roles within maquiladora operations. Further down the river in McAllen, local economists suggest 3000 residents of Hidalgo County work daily in Reynosa, Mexico maquiladoras. Some of these jobs are already disappearing along with planned investments because of uncertainty surrounding the current administration’s long term policies. Venture capitalists and corporations are hesitant to spend and some are halting production and even considering relocation. The impact on the economy and lives of residents on both sides of the border will, indisputably, be profound.

Mexican Trucks Coming to America Every Day - For Now

Because his ego demanded that NAFTA bear the Trump imprimatur, during his first administration he renegotiated an agreement that came to be known as USMCA, the U.S. Mexico Canada Agreement. New codification increased the threshold of automotive parts manufactured in the U.S. to 75 percent and that 40-45 percent of them had to be made by workers earning at least $16 an hour. The goal was to drive up wages in Mexico and reduce offshoring incentives to seek a closer approximation with American workers. Labor reforms were also adopted in Mexico, which included allowing independent unions and secret-ballot votes for workers. Negotiators of USMCA also included regulations on digital trade that prohibited data localization and allowed for duty-free digital goods like e-books, music, and software.

There was logic in many of the elements designed for USMCA, and companies adjusted supply chains to accommodate the regulations. The restoration of this president, however, enabled his ego to overpower a collective common sense for international trade. By declaring an emergency, Trump has circumvented the authority of congress with executive orders and is declaring random tariffs that will have extreme and long-standing consequences for the American and global economies. China is not likely to continue trading with the 85 percent tariff he is advocating and shipping commerce at the Port of Long Beach in California has already begun to turn to a trickle. Layoffs are occurring in numerous sectors of the U.S. economy and farmers, who voted for Trump by wide margins, have lost their most critical international markets. They will likely be bailed out for billions of dollars by an administration that has insisted, falsely, that it wants to reduce waste.

This crisis, and it will be deep and painful in the months ahead, is the product of nothing more than one man’s impetuousness and vanity. The president wants world leaders to come to him and plead for a better deal, convinced, as he told an interviewer, that he “runs the world.” Embarrassingly, he explained to Canada’s new Prime Minister Mark Carney during a 2017 G7 summit in Canada, “We don’t deal much with Canada, anyway, and have a trade deficit with them.” Carney, a former governor of the Central Bank of England and the Central Bank of Canada, whose IQ is triple digits higher than Trump’s, responded, “Actually, Mr. President, you’re wrong, the U.S. runs a trade surplus with Canada.” Carney used stats from the U.S. government to back up his claim.

“Hey buddy, can ya spare me a few yuan?”

Regardless, whatever concessions Trump might offer pleading representatives of trade partners, they will not be significant enough to make a sweeping economic difference. Something stupid, this way comes. The battleship cannot be turned and is on an inevitable course to hit a reef, run aground, break deep, and take water. The big boat is going down. Eventually, as many economists are predicting, the dollar will no longer be the world’s reserve currency and a gold-backed Chinese yuan will be the standard of commerce. The Chinese president, Xi Jinping, will be able to say with some authority that he “runs the world,” and his friend Vladimir Putin will be sitting next to him, smiling and nodding.

This will be Trump’s legacy.