For supply chain companies, U.S.-Mexico border closures could be catastrophic
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Update March 20, 2020: President Donald Trump told reporters on Friday that the United States and Mexico have agreed to restrict non-essential travel across their shared border. The measure will take effect on Saturday. Secretary of State Michael Pompeo said both countries wanted to ensure workers could continue to cross the border for their jobs, but some immigration attorneys worry their clients will be deemed “non-essential.” Trump said the new restrictions will not apply to trade between the U.S. and Mexico, but it’s unclear whether any freight crossing the border will be slowed or interrupted.
Mexico’s deputy health minister says he’s worried about people coming into Mexico from the United States. The U.S. has far more cases of COVID-19 than Mexico. The Mexican government even said it might consider restricting access at its northern borders. For businesses that operate on both sides of the border, any shutdown could be catastrophic.
That includes businesses like, Hessen Group, which has an office in Brownsville, Texas. There, an 18-wheeler carrying pipes for oil and gas backs up to a loading dock. Hessen is a supply chain company — it acquires parts and components for other companies to build stuff. Its headquarters are in Matamoros, Mexico, just a few miles away.
The company’s president, Francisco Homs, says that those pipes are on their way to Canada, and a few of them will travel all the way to Alaska for an oil company up there.
Homs picks up a little box and explains that inside is a little screw for a tractor. Without it, a farmer would have to stop working because the tractor wouldn’t function.
That little screw was imported from China. Homs says the slowdown of factories in China, because of the coronavirus, means his suppliers, like the screw-maker, were running low. That makes it tough for him to get his hands on the parts his customers need.
The Chinese government says the virus has peaked there and factories are starting to get back to normal. But Homs admits he doesn’t know if he can trust that.
He says his company might have dodged a bullet if Chinese suppliers are indeed coming back online.
His big concern now is the Texas/Mexico border. If they close the border, he said, it would cause problems and disrupt the economies of the United States, Mexico and Canada.
We’d just stop doing business, he said.
All of his shipments run from Mexico into the United States and then some into Canada. So any border closure would make Hessen’s work impossible.
And we can’t be interrupted, he added, because that would have a knock-on effect to many other businesses that depend on the parts and components that he gets to them.
The Hessen Group employs about 150 people split between both sides of the border. It’s a small part of a large ecosystem.
Two-thirds of Mexico’s export business is with the United States. And 70% of that passes through Texas.
Homs says before anyone considers closing the border, President Donald Trump and Mexico’s president, Andrés Manuel López Obrador, should discuss a coordinated response to the virus.
As for now, he says all of his people can work from home, if the situation calls for it.
Everyone here has a laptop, he said. But he says the independent truck drivers and contractors who work on the loading docks, they have to be on site to run things.
Those people also only get paid if they show up for work. So, for now, they’re glad the COVID-19 hasn’t shut this part of Texas down, yet.
COVID-19 Economy FAQs
What do I need to know about tax season this year?
Glad you asked! We have a whole separate FAQ section on that. Some quick hits: The deadline has been extended from April 15 to May 17 for individuals. Also, millions of people received unemployment benefits in 2020 — up to $10,200 of which will now be tax-free for those with an adjusted gross income of less than $150,000. And, for those who filed before the American Rescue Plan passed, simply put, you do not need to file an amended return at the moment. Find answers to the rest of your questions here.
How long will it be until the economy is back to normal?
It feels like things are getting better, more and more people getting vaccinated, more businesses opening, but we’re not entirely out of the woods. To illustrate: two recent pieces of news from the Centers for Disease Control. Item 1: The CDC is extending its tenant eviction moratorium to June 30. Item 2: The cruise industry didn’t get what it wanted — restrictions on sailing from U.S. ports will stay in place until November. Very different issues with different stakes, but both point to the fact that the CDC thinks we still have a ways to go before the pandemic is over, according to Dr. Philip Landrigan, who used to work at the CDC and now teaches at Boston College.
How are those COVID relief payments affecting consumers?
Payments started going out within days of President Joe Biden signing the American Rescue Plan, and that’s been a big shot in the arm for consumers, said John Leer at Morning Consult, which polls Americans every day. “Consumer confidence is really on a tear. They are growing more confident at a faster rate than they have following the prior two stimulus packages.” Leer said this time around the checks are bigger and they’re getting out faster. Now, rising confidence is likely to spark more consumer spending. But Lisa Rowan at Forbes Advisor said it’s not clear how much or how fast.
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