A report from two Mexico-based New York Times journalists warned that President Trump’s designation of Mexican drug cartels as foreign terror groups could “hurt” the U.S. economy. 

In a story published on Wednesday, reporters Maria Abi-Habib and Simon Romero wrote that Trump’s recent executive order could force American companies to choose to end business in Mexico rather than incur government sanctions.

This could result in “an outcome that could have a major effect on both countries given their deep economic interdependence,” the two wrote. The headline read, “How Labeling Cartels ‘Terrorists’ Could Hurt the U.S. Economy.” 

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Trump signed a flurry of executive orders on his first day in office, including one that designated international cartels and organizations, including MS-13 and the violent Tren de Aragua, as Foreign Terrorist Organizations (FTOs) and Specially Designated Global Terrorists (SDGT).

By putting an FTO designation on these groups, the U.S. can take targeted action against them, including financial penalties and even military action. 

Despite the deadly threat of these cartels, the Times told readers that going after them in the way that Trump wants “could be immensely complicated” as many American companies manufacture in Mexico and have ties with some of these cartels. 

“These criminal networks have extended their operations far beyond drug trafficking and human smuggling,” the reporters stated. “They are now embedded in a wide swath of the legal economy, from avocado farming to the country’s billion-dollar tourism industry, making it hard to be absolutely sure that American companies are isolated from cartel activities.”

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The report quoted sanctions policy and threat finance senior adviser Samantha Sultoon, who stated that even though American leaders and lawmakers have wanted to treat cartels as terrorists in the past, they’ve backed off after seeing “what the implications would be on trade, economic and financial relationships between Mexico and the United States.”

Sultoon, who advised both the previous Trump and Biden administrations, added, “They have all come away thinking that such a designation would actually be super shortsighted and ill-considered, though prior administrations viewed the U.S.-Mexico relationship far differently than the incoming Trump administration appears to.”

Abi-Habib and Simon Romero continued listing the potential problems with Trump’s executive order, stating it “could lead to severe penalties — including substantial fines, asset seizures and criminal charges — on companies and individuals found to be paying ransom or extortion payments.”

“U.S. companies could also be ensnared by standard payments made to Mexican companies that a cartel controls without the American companies’ knowledge,” they added.

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Further, the reporters cited U.S. officials who said it would be almost impossible to figure out which businesses employ cartel members or are affiliated with the groups in any way. Following an FTO designation, American businesses might choose to forgo the risk of doing business with Mexican entities for fear of incurring penalties from the government. 

Citing Swiss lawyer and terrorist financing expert Fabian Teichmann, the reporters mentioned how banks may “ultimately decide to avoid entire sectors perceived as high risk” in the country. 

Additionally, the FTO designation could hurt U.S. companies north of the border that employ Mexican workers. 

The report also noted that money transfer companies cutting transactions to Mexico over worries about cartel ties, “could affect the remittances the country relies on.” It added that this would “be devastating for the Mexican economy, which received $63.3 billion in remittances in 2023, nearly 5 percent of the country’s gross domestic product.”