Mexican border cities are in limbo as tariff threats spark fears of a recession

CIUDAD JUÁREZ, Mexico (AP) — As soon as the sun glints over miles of border fence dividing the United States and Mexico, the engines of cargo trucks packed with auto and computer parts roar to life along border bridges and bleary-eyed workers file into factories to assemble a multitude of products geared toward the U.S. market.

For more than half a century, this daily rhythm has helped fuel the heartbeat of a transnational machine that generated more than $800 billion in trade between the U.S. and Mexico in 2024 alone.

Over the past year, however, President Donald Trump's threatened 25% tariffs against Mexico and Canada have plunged manufacturing hubs all along the northern Mexican border into limbo, a state that persists despite a one-month reprieve to which Trump agreed on Monday.

Tariffs would cripple Mexican border economies that are reliant on factories churning out products for the U.S. — auto parts, medical supplies, computer components, myriad electronics — and likely thrust the country into a recession, economic forecasters have warned. Some workers wonder how much longer they'll have jobs, while business leaders say the uncertainty has already led many investors to start tightening their purse strings.

“It’s a conflict between governments and we’re the ones most affected,” said 58-year-old truck driver Carlos Ponce, leaning against his rig at the customs border crossing between Ciudad Juárez and El Paso, Texas. “Tomorrow, who knows what will happen?”

Ponce, who was driving a truck full of car shock absorbers, said he's spent the past 35 years moving goods across the border, just as his father did before him. Now, he's unsure how much longer that will last.

Manufacturing in export-oriented assembly plants known as maquiladoras are the heart of Ciudad Juárez's economy, with 97% of its goods going to the U.S., according to figures from Mexico's Economic Ministry.

The factories were born in the 1960s in an attempt to boost economic development in northern Mexico and lower prices for U.S. consumers. The maquiladora program later took off after the North American Free Trade Agreement, or NAFTA, was signed in 1994. The agreement was supplanted by a similar pact, the United States-Mexico-Canada Agreement, or USMCA, negotiated between the three countries during Trump's first term.

Today, neon signs with the dollar-to-peso exchange rate flash across the city, a reminder of the close ties binding both sides of the border.

“Everything that happens in the United States: its economic, social policy … directly affects us because companies here in Mexico depend on what they sell in the United States,” said Thor Salayandia, head of his family's auto-parts manufacturing facility in Ciudad Juárez. "The United States also needs Mexico to keep manufacturing, but they’re not seeing things like that.”

This week, workers and business leaders alike breathed a sigh of relief when Mexican President Claudia Sheinbaum announced she had negotiated with Trump to delay tariffs one month.

“Now, we're buying time,” Salayandia said.

Workers here assemble everything from auto parts to computer panels to T-shirts emblazoned with the American flag, logos of popular U.S. football teams and slogans such as “Proud to be a federal employee.”

Parts can cross the border multiple times before the final product is sold to U.S. consumers. That economic interdependence has left many in the city struggling to imagine a future without it. One U.S. company said it would likely have to move part of its manufacturing in the city to the U.S., but at a sharp cost.

Antonio Ruiz, a compliance officer at Tecma, a U.S. firm that helps foreign companies set up shop along the border, said his was among a number of businesses to call emergency meetings over the weekend as economic forecasters warned that the tariffs could drive Mexico into a recession.

“It’s very difficult to be prepared for something that has never happened before,” Ruiz said. “As much as you want to prepare for it, the best you can do is prepare to brace yourself in the short term.”

Salayandia and economists warn that any sort of tax could lead to cascading unemployment and rising prices on both sides of the border. In Mexico, they say, it could also spur a rise in violence in border areas by pushing the unemployed into the hands of drug cartels, as well as an increase in Mexican migration to the U.S.

Manuel Sotelo, a leader of Mexico’s National Chamber of Freight Transportation who owns a fleet of trucks that cross the border every day, sees the tariff threats as more of a political power move than a future economic reality.

"Both countries would be paralyzed," said Sotelo, who sat at a desk covered with local newspapers carrying bold headlines on the tariffs, a Trump bobblehead positioned behind him. “Let's say he did slap a 25% tariff (on Mexico), what would they do during the Super Bowl without avocados?”

On the other hand, Sotelo acknowledges that the tariff talk has already inflicted some damage. He and other business leaders say that over the past year they've watched investment dip in Ciudad Juárez because of political uncertainty, as investors hesitate to funnel their money into businesses that could collapse with the stroke of a pen in Washington.

While Trump's election has been the primary driver of that uncertainty, June elections in Mexico and a controversial judicial reform carried out by Mexico's governing party have added to it. Sotelo said he saw a 7% drop in business last year, and only expects that to continue until lingering tariff threats are resolved.

One collective of maquiladoras in the city says it has seen at least three factories halt production.

“Every time we hear this discourse from political leaders, the people running our governments, it sends shock waves through the border,” Salayandia said. "Because the border is a global thermometer. Our products go all over the world. Those companies will go look in other parts of the world where they offer conditions to keep competing.”

Associated Press journalist Fernanda Pesce contributed to this report.

A ceramic statue depicting Mexico's former President Andres Manuel Lopez Obrador is displayed for sale among a variety of figurines at a roadside curios shop in Mexicali, Mexico, Saturday, Feb. 1, 2025. (AP Photo/Fernando Llano)

An employee works in a textile factory in Tlaxcala, Mexico, Tuesday, Feb. 4, 2025. (AP Photo/Eduardo Verdugo)

An employee works at a textile factory in Tlaxcala, Mexico, Tuesday, Feb. 4, 2025. (AP Photo/Eduardo Verdugo)

An employee works at a textile factory in Tlaxcala, Mexico, Tuesday, Feb. 4, 2025. (AP Photo/Eduardo Verdugo)

Employees work at a textile factory in Tlaxcala, Mexico, Tuesday, Feb. 4, 2025. (AP Photo/Eduardo Verdugo)

People wait for ground transportation near an exchange office in Mexicali, Mexico, Saturday, Feb. 1, 2025. (AP Photo/Fernando Llano)

A private security officer with a sniffer dog inspects a truck loaded with sweet corn destined for the United States at the border in Mexicali, Mexico, Monday, Feb. 3, 2025. (AP Photo/Fernando Llano)

A truck pulls newly assembled truck cabs across the border bridge, from Mexico into the United States, from Mexicali, Mexico, Monday, Feb. 3, 2025. (AP Photo/Fernando Llano)

National flags representing the United States and Mexico hang inside in a textile factory that produces T-shirts, in Ciudad Juarez, Mexico, Tuesday, Feb. 4, 2025. (AP Photo/Christian Chavez)

The U.S. Border with Mexico is seen in an aerial view Friday, Jan. 31, 2025, near San Diego. (AP Photo/Jae C. Hong)

An employee works at a textile factory that produces T-shirts, in Ciudad Juarez, Mexico, Tuesday, Feb. 4, 2025. (AP Photo/Christian Chavez)

BANGKOK (AP) — Shares were mixed in Asia on Tuesday, with Chinese markets retreating, following a broad rally on Wall Street fueled by hopes the Trump administration may take a more targeted approach as it tees up a new round of tariffs on imported goods next week.

U.S. futures edged lower and oil prices were little changed.

Tokyo's Nikkei 225 gained 0.5% to 37,780.54, while the Kospi in South Korea lost 0.6% to 2,615.81.

Hong Kong's Hang Seng sank 2.1% to 23,402.56 as heavy selling of tech-related shares pulled the benchmark lower.

Cell phone maker Xiaomi's Hong Kong-traded shares dropped 5.9% and delivery app company Meituan lost 4.2%. E-commerce giant Alibaba was down 3.5%.

The Shanghai Composite index was unchanged at 3,369.98.

Taiwan's Taiex gained 0.8% and the SET in Thailand lost 0.5%.

Stocks have been riding waves of hope and worry as President Donald Trump has announced and then amended plans on higher tariffs. A new round of tariffs is scheduled for April 2, but Trump has been somewhat closely guarded about his plans, saying Monday that even though he wants to charge “reciprocal” rates — import taxes to match the rates charged by other countries -- that “we might be even nicer than that.”

Other comments have provided less reassurance and in recent days, Chinese markets that had been riding high have pulled back. In a Truth Social post, Trump said Venezuela has been “very hostile” to the U.S. and countries purchasing its oil will be forced to pay a 25% tariff on all exports to the U.S. starting April 2.

That would likely more than double the already high tariffs facing China, which in 2023 bought 68% of the oil exported by Venezuela, according to a 2024 analysis by the U.S. Energy Information Administration. The U.S. also imports oil from Venezuela.

On Monday, the S&P 500 jumped 1.8%. to 5,767.57, while the Dow Jones Industrial Average rose 1.4% to 42,583.32. The Nasdaq composite closed 2.3% higher, at 18,188.59.

Despite the gains, the benchmark S&P 500 has lost 1.9% so far this year out of concerns that a trade war could hinder economic growth and increase inflationary pressures.

Gains on Monday were broad, with 84% of stocks within the S&P 500 ending higher. Nearly every sector within the index rose.

Technology stocks helped lead the way. The stocks are among the most valuable on Wall Street and tend to have an outsized impact on the broader market's direction.

Nvidia rose 3.2% and Apple added 1.1%.

Tesla climbed 11.9% for the biggest gain among S&P 500 stocks. The electric vehicle maker is still down about 31% for the year.

Wall Street has several economic updates this week. Business group The Conference Board releases its consumer confidence survey for March on Tuesday. On Friday, the U.S. government releases the personal consumption expenditures price index for February, a measure of inflation closely watched by the Federal Reserve.

The Fed started cutting its benchmark interest rate at the end of 2024 but is cautious about inflation, which is just above its 2% goal. Those cuts came after the central bank raised interest rates in order to cool inflation from a two-decade high.

Lower interest rates can ease borrowing costs and help give the economy a boost, but they can also push inflation higher.

In other dealings early Tuesday, U.S. benchmark crude oil rose 13 cents to $69.24 per barrel. Brent crude, the international standard, climbed 13 cents, to $72.50 per barrel.

The U.S. dollar fell to 150.59 Japanese yen from 150.70 yen. The euro rose to $1.0803 from $1.0802.

Financial information is displayed on the floor at the New York Stock Exchange in New York, Monday, March 24, 2025. (AP Photo/Seth Wenig)

Financial information is displayed on the floor at the New York Stock Exchange in New York, Monday, March 24, 2025. (AP Photo/Seth Wenig)

Currency traders watch monitors near a screen showing the Korea Composite Stock Price Index (KOSPI) at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Tuesday, March 25, 2025. (AP Photo/Ahn Young-joon)

The display board with the Dax curve in the trading hall of the Frankfurt Stock Exchange, Germany, Thursday, March 20, 2025. (Arne Dedert/dpa/dpa via AP)

Currency traders work near a screen showing the Korea Composite Stock Price Index (KOSPI), top left, and the foreign exchange rate between U.S. dollar and South Korean won, top center, at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Tuesday, March 25, 2025. (AP Photo/Ahn Young-joon)

A currency trader talks on the phone near a screen showing the Korea Composite Stock Price Index (KOSPI) at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Tuesday, March 25, 2025. (AP Photo/Ahn Young-joon)