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  HOME | Mexico

Trump’s Threat of Tariffs on Mexico Prompts Outcry

WASHINGTON – A day after United States President Donald Trump threatened to impose across-the-board tariffs on Mexico if it doesn’t crack down on the flow of migrants into the US, business groups and lawmakers expressed opposition to the plan, while the Mexican government said it would meet with the US to explore a diplomatic solution.

Trump’s tweet late Thursday that the US could impose 5 percent tariffs on nearly $360 billion in Mexican imports caught some of his aides by surprise, and the plan was opposed by his top trade adviser, Robert Lighthizer, according to people familiar with the situation.

The move would be Trump’s most dramatic on the trade front to date, larger than the tariffs applied to China. There is no certainty that the US would follow through on the tariffs, which aren’t set to kick in until June 10, and Trump has in the past used the threat of tariffs to bring countries to the negotiating table.

Trump defended the move on Friday, tweeting that “Mexico has taken advantage of the United States for decades. Because of the Dems, our Immigration Laws are BAD. Mexico makes a FORTUNE from the US, have for decades, they can easily fix this problem. Time for them to finally do what must be done!”

Trump’s tariff threat amounts to an ultimatum for Mexico: Either agree to take in and house all asylum seekers fleeing poverty and violence in Guatemala, Honduras and El Salvador, or block them from entering Mexico at all.

It is unclear how far Mexico would actually have to go to satisfy the administration’s demands and prompt the White House to pull back its tariffs threat, spurred by its frustration over large groups of migrant families arriving at the US border.

Mexican Foreign Minister Marcelo Ebrard said on Friday he had spoken with US Secretary of State Mike Pompeo and Trump adviser Jared Kushner. He said he was to meet Pompeo on Wednesday for negotiations on the immigration issue.

“We will be firm and defend the dignity of Mexico,” Ebrard tweeted. Mexico is widely expected to retaliate if tariffs are imposed.

The reaction from the business community was pitched and immediate. US Chamber of Commerce leaders said they were baffled by the decision, pointing out that passing the US-Mexico-Canada Agreement was a priority for the administration. They and other business groups also said tariffs would ultimately be paid by American consumers and companies and would jeopardize North American supply chains.

Lighthizer has said that tariffs on Mexico will dim prospects for ratification of the USMCA, according to people familiar with the situation. That accord, intended to replace the North American Free Trade Agreement, was already facing a rocky path in the Democratic-controlled House.

“Lighthizer is not happy,” said one administration official.

A spokesman for Lighthizer said he “never argued against the president’s tariff plan and agrees that strong action is needed to resolve the longstanding, serious immigration crisis.”

The tariffs Trump threatened to impose would begin at 5 percent on June 10 unless Mexico takes steps to stem the flow of undocumented immigrants across the border before then. If no action is taken, tariffs would rise in steps to 25 percent by Oct. 1.

The action could have implications beyond Mexico as the US negotiates trade deals with China, the European Union and Japan, said Bradford Ward, a former trade official in the Trump administration.

“Certainly the idea that the United States might be considered to have changed its mind might give those other countries some pause going forward about how they would negotiate and what they might agree to,” said Ward, current partner at law firm King & Spalding in Washington.

Trump has mused over using tariffs against Mexico for several weeks, according to the people familiar with the situation, who said the president grew more serious about the idea on Wednesday. Lighthizer and others tried to talk the president out of the move, concerned about its impact on the USMCA negotiations, these people said. Trump’s top economic adviser, Lawrence Kudlow, has been on medical leave in recent days and wasn’t involved in the discussions.

One concern is sending mixed signals, they said, with the administration punishing Mexico with retaliatory tariffs on the one hand and at the same time asking Congress to approve a pact freeing up trade.

In a statement late Thursday, Trump said he would impose the tariffs through his authority under the International Emergency Economic Powers Act in an effort to stop the flow of migrants from Mexico.

“Mexico’s passive cooperation in allowing this mass incursion constitutes an emergency and extraordinary threat to the national security and economy of the United States,” the president said.

Many members of Congress, including some of Trump’s fellow Republicans, criticized the decision.

“This is a misuse of presidential tariff authority and counter to congressional intent,” Sen. Chuck Grassley (R., Iowa), chairman of the Senate Finance Committee, said in a statement urging Trump to reconsider the decision.

Senate Majority Leader Mitch McConnell (R., Ky.) cited on Friday what he called a “humanitarian crisis at our southern border” but stressed the importance of economic ties with Mexico.

“Any proposal that impacts this relationship deserves serious examination and I look forward to discussing this plan in greater detail with my colleagues and the administration,” he said.

House Speaker Nancy Pelosi (D., Calif.) said: “The president’s threat is not rooted in wise trade policy but has more to do with bad immigration policy on his part.”

Others defended Trump. Sen. Lindsey Graham (R, S.C.) tweeted on Thursday: “I support President Trump’s decision to impose tariffs on Mexico until they up their game to help us with our border disaster.”

Earlier on the day of Trump’s tariff threat, Lighthizer sent a letter to congressional leaders laying the groundwork for USMCA ratification. Also on Thursday, Vice President Mike Pence traveled to Ottawa as part of a coordinated three-nation effort to start the ratification process of the new version of NAFTA. Pence declined to comment directly on Thursday’s announcement.

Rep. Earl Blumenauer (D., Ore.), chairman of a House trade panel, said he spoke with Lighthizer Thursday afternoon about the Mexico-Canada deal but didn’t learn about the tariffs.

“He didn’t say a word to me about this, which raises two questions,” he said. “If he knew, why wouldn’t he tell me? And if he didn’t know, why the hell didn’t he know?”

Some trade hawks in the administration backed the immigration plan.

“If you look at it from an investor’s point of view and a corporate point of view, what we have in Mexico is the export, one of their high exports, of illegal aliens. And it’s a criminal enterprise,” Peter Navarro, a senior trade adviser, said on CNBC.

Mulvaney sought to differentiate the action, which the administration sees as an immigration move based on national security, from economic efforts such as USMCA. Yet the administration has linked national security and economic concerns previously in the steel and aluminum tariffs. Trump has repeatedly said tariffs can raise government revenue and bring back manufacturing jobs.

Beyond Mexico, Trump’s latest tariff threat could chill talks with other major trading partners.

Talks with China on a deal that would have scaled back tariffs on $250 billion in Chinese goods are at an impasse after the Trump administration accused Beijing of backtracking on previous commitments in the talks. Some trade experts following the talks believe President Xi Jinping and other officials were reluctant to strike a deal with the Trump administration because it wouldn’t necessarily end the trade conflict.

“Xi Jinping is having a great day now that he can show his people that he didn’t miscalculate in the trade negotiation with the US,” said Jorge Guajardo, a former Mexican ambassador to Beijing, now at Washington consulting firm McLarty Associates. “He can credibly make a point that there’s simply no deal to be made with Trump.”

Chinese foreign ministry spokesman Geng Shuang said Friday that “the US has repeatedly resorted to bullying trade practices and China is not the only victim.”

Another country watching the North American friction is Japan. Japanese auto makers have invested heavily in production in Mexico as well as the US, and Trump has threatened tariffs on Japanese cars in part to bring Tokyo to the negotiating table for a possible bilateral trade deal.

“It is not desirable for the world economy to have an exchange of additional tariffs,” Japanese Economy Minister Toshimitsu Motegi said Friday, according to a Kyodo News report. “I hope that this will be resolved through discussions.”

Some trading partners have learned to take Trump’s pattern of tariff threats – many of which haven’t been implemented – with a grain of salt. Still, this one is closely linked to immigration, a major political focus of Trump.

“You’re sending a signal to your base that you’re concerned about immigration,” said Ward, the former Trump administration trade official. “I don’t know that this is completely out of character for this administration.”

 

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