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Tariff threat creates peso problem at the border

Lower exchange rate gives peso less buying power
Posted: 8:18 AM, Jun 04, 2019
Updated: 2019-06-04 12:30:32-04
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Trump imposes tariff on Mexico over migrant squabble

SAN YSIDRO, Calif. (KGTV) - Business leaders on the U.S. side of the border are worried that President Trump's threat of tariffs against Mexico over illegal immigration could cause a sharp decline in sales.

In the week after the president announced his plan to impose a 5 percent tariff on Mexican goods, the peso dropped nearly 4 percent in value. That means it's worth less compared to the U.S. dollar.

Local shop owner Sunil Gakhreja, who is also a member of the San Ysidro Chamber of Commerce Board of Directors, said 99 percent of his customers come from Mexico. He also said if the peso gets much lower, people will stop crossing the border to shop.

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"Right now, it's around 18 or 19 (pesos per dollar). That's fine," Gakhreja said. "But when it gets to 20, people won't come. Trust me, it's a ghost town; Nno one comes in."

Trump's plan would impose a 5 percent tax starting June 10. The tariff would increase by another 5 percent every month through October, topping out at 25 percent. Trump said it will stay in place until Mexico can stop the flow of people crossing into the U.S. illegally.

Gakhreja said he and other business owners are still feeling the effects of a five-hour border closure in November. That cost an estimated $5.3 million to local shops.

Currency exchange businesses say they're keeping an eye on the changes from minute to minute.

RELATED: Trump says Mexico tariffs likely to go into effect

"It's horrifying," said Bertha Fridman with JSD Money Exchange. "It's the money that goes in your pocket, and that's less."

Fridman said her business deals mostly with people exchanging dollars for pesos, and she won't be affected. But she hears from people south of the border, and they're worried.

"It's the psychology of the people," she said.

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"Once their buying power drops, they will not buy from us," said Gakhreja. "Even if it changes by 2 or 3 pesos, that's real money. They'll walk."