Mexico’s reaction to U.S. President-elect Donald Trump’s threat of tariffs has been calm, firm, and based on facts. Now, the response needs to be followed by explicit actions or risk a North America trade conflict.
In responding to Trump’s warnings about imposing 25% tariffs on all Mexican and Canadian goods if those countries don’t do more to stem illegal migration and the trafficking of drugs into the U.S., Mexico President Claudia Sheinbaum made a rational economic argument: Such tariffs will hurt U.S. companies operating in Mexico, particularly automakers, and spur inflation and unemployment on both sides of the border.
“Threats and tariffs are not the way to address migration dynamics or drug consumption in the United States. Cooperation and mutual understanding are needed,” Sheinbaum said in a letter addressed to Trump this week.
Sheinbaum is right that the strength of North America’s economy relies on keeping what’s known as the United States-Mexico-Canada, or USMCA, trade deal alive. She is also right that tariffs and retaliatory tariffs would hurt mutual prosperity. And she’s right again that Mexicans are dying by the thousands from guns flooding into the country by way of its northern neighbor because of the U.S.’s insatiable demand for illicit drugs. Sheinbaum’s problem is that all her arguments stop being convincing when viewed through a Trumpian “America First” lens.
That’s because the 47th U.S. president isn’t looking to debate conceptual economic and public policies. If economic rationality wasn’t enough to prevent Trump from being reelected, what makes Sheinbaum think it would be capable of dodging tariffs? Whatever Mexicans feel about Trump’s style and prejudices, the bottom line is that some of his requests will need to be addressed if Sheinbaum doesn’t want her economy, which has supplanted China as the U.S.’s biggest trading partner, to derail amid the weight of trade disputes, border disruptions and mass deportations. The Mexican peso’s depreciation the past few weeks could be just a taste of things to come.
Mexico shouldn’t necessarily consider this as punishment. When it comes to migration and drug trafficking, the government desperately needs to work with Trump on an effective response because of its own domestic urgencies. As the U.S.’s former ambassador to the country, Christopher Landau, argued recently, uncontrolled migration is no longer just a U.S.-Mexico issue but a global phenomenon where Mexico became the “last link” used by millions of people from around the world to pass through to its northern neighbor.
Nevermind Trump — this is a huge geopolitical, economic and humanitarian challenge for Mexico. That’s especially true given the country’s narco mess. The more cartels are allowed to expand and operate, contaminating societies with their violence and impunity, the more unavoidable it would be for Mexico to attract international support to address the problem. It’s a matter of national security, not just an annoying request from the gringos.
Initial signs of cooperation emerged Wednesday during a phone call Trump held with Sheinbaum, a conversation the President-elect called “wonderful” even if disagreements regarding migration policy remain. More needs to be seen in concrete terms once Trump arrives at the White House.
Sheinbaum’s response was also designed for an uneasy domestic audience as she navigates a delicate balance within her own Morena party. Unlike her predecessor Andrés Manuel López Obrador, who was the one and only voice setting the tone for the government, Trump’s return has rattled Mexico’s powerful ruling party, which controls most of the country’s political establishment. Here is where Trump’s tariff salvo was met with contempt, with some lawmakers wrongly arguing that Mexico should favor China over the U.S. Sheinbaum can’t afford to let these radical elements in her coalition roam free.
The Mexican government also has the tendency to think that just by saying something, it becomes automatically true — such as its insistence that the deep constitutional changes happening in the country won’t impact the USMCA or dismissing the fentanyl threat by saying its origins lie in Asia. The relationship between the U.S. and Mexico, as strategic as it may be for both nations, has steadily deteriorated in recent years and the “mutual understanding” pleas work both ways: Mexico would do well in hearing out the growing list of grievances that Washington has been, fairly or not, accumulating.
He didn’t mention them, but Trump’s tariff salvo is a reminder of two other thorny issues that threaten relationships in the region, and they are the U.S.’s growing trade deficit with its regional partners and the increasing influence of China in local supply chains. Since the old NAFTA was refashioned into the USMCA in 2018, Mexico’s annual trade surplus with the U.S. has doubled to about $165 billion. By design or not, the reduction in the U.S. deficit with China was mostly made up by an increasing gap with Mexico and Canada. It’s just a matter of time before Trump takes notice. It’s up to Mexico to get ahead of the curve, and follow through with a vow to replace some Chinese imports with North American-made products.
Just as we saw during his first term in office, Trump is pushing to get the best possible deal and will likely back off once he gets the political win he’s seeking. Destabilizing North America or even causing the USMCA to blow up would be a geopolitical gift to China that Washington would regret. Yet Mexico shouldn’t take any of this for granted. It needs to understand that Trump won’t be convinced with lessons in economic orthodoxy but rather with unambiguous moves that address his concerns.
JP Spinetto is a Bloomberg Opinion columnist covering Latin American business, economic affairs and politics. He was previously Bloomberg News’ managing editor for economics and government in the region.
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Publish date : 2024-12-04 13:03:00
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