US Arms Buildup Tension: What Are the Consequences for Consumers?

The United States’ arms buildup tension towards Latin America – which intensified after the attack on

on January 3 – has economic repercussions that not only affect capital investors but also consumers. According to

, an economist and specialist in the History of Economic Thought from the National Autonomous University of Mexico (UNAM), episodes of tension increase insurance, logistics, and regulatory compliance costs. This often temporarily “depreciates” the exchange rate. Although the specialist mentions that the pass-through effect (i.e., the transfer of increased production costs to consumption) is more moderate than before, it still manifests in imported goods and products. This also applies to products that can be easily traded internationally, such as processed foods, hygiene products, or basic basket goods. Read more in:

Repercussions on Inflation

Furthermore, Moreno also explains that repeated shocks necessitate maintaining higher inflation rates for longer periods, which increases the cost of consumer credit and small business loans. “Banxico has consolidated an inflation-targeting regime with less sensitivity to the exchange rate, but repeated shocks necessitate sustaining higher rates,” he states. Romero also warns of consequences regarding the review of the Trade Agreement between Mexico, the United States, and Canada (T-MEC), as, if used as a tool of pressure, location decisions are postponed or demand higher political risk insurance premiums. In addition, supply chains could relocate, or greater national content might be demanded. In the short term, this will put pressure on the costs of the basic goods basket or essential services such as transportation or energy. “If the T-MEC review is accompanied by tensions, supply chains may relocate or demand greater national content with increasing costs; in the short term, this puts pressure on certain prices in the basic basket and essential services,” he declared.

T-MEC: In Doubt Again?

On Tuesday, January 13, then-U.S. President Donald Trump declared that they do not need products manufactured by trade partners, especially automobiles produced in Mexico. This statement, made during a tour of a Ford Motor factory in Dearborn, Michigan, once again casts doubt on the renegotiation of the T-MEC; Trump asserted that the trade agreement “has no real advantage, it is irrelevant,” as reported by El Economista. Discover more at:

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