How tariffs could impact San Diego’s regional economy

Above: Nexstar Media Wire video on what tariffs are.

SAN DIEGO (FOX 5/KUSI) — President Donald Trump agreed Monday to delay the tariffs on Canada and Mexico as the leaders of the United States’ closest neighbors negotiated over illegal immigration and drug trafficking strategies.

Trump agreed to pause the 25% tariffs, which were implemented Saturday, for 30 days. However, the financial threat of the tariffs and a potential trade war still looms over CaliBaja, the largest economic zone along the U.S.-Mexico border in which San Diego County lies.

“We know that this will be a volatile period for the North American supply chains that enable this region to compete globally. We have been here before,” said Dr. Nikia Clarke, the chief strategy officer for San Diego Regional Economic Development Center, in a statement to FOX 5/KUSI Tuesday. “Here in San Diego, from medical devices to semiconductors and consumer goods, our supply chains are so integrated that 40% of what we import from Mexico was made by American workers in the first place.”

She added, “Our job in this moment is to be agile and creative in helping firms of every size—who have played by the rules and made significant investments in this country and its neighbors—to navigate uncertainty, continue to reach their customers and suppliers, and maintain jobs and supply chains in our most critical industries.”

CaliBaja is comprised of San Diego and Imperial counties plus six Mexican cities in Baja California (Ensenada, Mexicali, Rosarito, San Quintin, Tecate and Tijuana).

According to a study by the University of San Diego’s Ahlers Center for International Business in 2022, CaliBaja has a regional GDP of $250 billion and an estimated $70 billion in cross border trade flows.

The study used a “Location Quotient (LQ)” methodology to identify high performing industries in the region. LQs compare the concentration of an industry nationwide versus within a specific geographic location, according to the Bureau of Labor Statistics.

In 2018, there were more than 33,000 firms across 70 different industries in CaliBaja that met the “High LQ” threshold of 1.5 or above. Together, these firms employed 657,598 individuals.

Furthermore, the study found much of the CaliBaja’s manufacturing capability was from the Mexican side. In 2018, Tijuana had 41 industries with a High LQ and Mexicali had 49, while San Diego had 35.

Manufacturing of audio and video equipment, medical equipment and supplies, and semiconductors or other electronic components are among the key industries in the region, the study showed.

Alan Gin, an economics professor at the University of San Diego, told FOX 5/KUSI last week (before the pause went into effect) Trump’s plan to implement tariffs could violate the U.S.-Mexico-Canada trade agreement signed in 2020.

“The worry is that if the U.S. goes against this agreement, that other countries in the future would be wondering what’s the value then of having some agreement with the U.S.,” Gin said.

For now, it remains unclear just how much these industries will be affected by Trump’s tariffs when the 30-day pause period ends and how much those impacts will be felt across San Diego County.

The Otay Mesa Chamber of Commerce will host a free emergency webinar Friday for businesses to discuss legal challenges and next steps regarding the tariffs. The webinar will take place between 12:30 and 1:30 p.m.

Despite the 30-day pause on tariffs imposed on Mexico and Canada, the 10% tariff on China went into effect Tuesday as planned.