Trump's threat of trade sanctions creates unrest both in Mexico and in the U.S. Tremendous interests are at stake.
The surprising threat from U.S. President Donald Trump to tax products from Mexico with an import duty as a means of pressure on immigration has led to unrest in both countries and at international stock exchanges on Friday. There are increasing fears that Trump, out of frustration with the situation at America’s southern border, will threaten the growth of the global economy.
On Thursday night, Trump unexpectedly announced a 5% import duty, starting June 10, on all products from Mexico, one of the biggest trade partners of the U.S. The goal is to force the neighboring country to curb the flow of immigrants from Central America. Should Mexico not do this to the satisfaction of the president, then the tax will be gradually increased, up to 25% as of Oct. 1, the White House said in a statement.
The direct coupling of trade policy with immigration is a new drastic step. Trump often resorts to import duties to pressure trading partners, among them China, European countries and neighboring countries Canada and Mexico. So far, this has concerned economic policy: the White House wants to enforce better trade agreements. With this measure against Mexico, Trump is using his favorite weapon for another goal: curbing immigration to the U.S. from Central America.
Trump is watching with dismay as immigrants from Honduras, El Salvador and Guatemala continue to trek to America’s southern border to request asylum. His plan to build a wall on the border, a core promise of his campaign, has stagnated because of Congress's refusal to pay for it. Meanwhile, according to the U.S. Border Patrol, an estimated 80,000 people are being detained, and 4,500 people arrive on a daily basis.
Trump Plays with Fire
By threatening a trade war as a means of pressure on Mexico, Trump plays with fire: economic prosperity, which counts as one of his most important achievements, is put under pressure. American stock markets, already ailing because of continuing trade tensions between the U.S. and China, fell sharply on Friday, following markets in Asia and Europe. Companies that depend on trade between the U.S. and Mexico, such as large car producers, especially suffered.
Mexico is one of the largest exporters to the U.S.: in 2018 the country sent more than $346 billion worth of goods across the border. The country is the largest foreign supplier of agricultural products. Plus, Mexico is an important industrial trading partner, with closely knit production chains in, among others, the automotive industry.
The business community in the U.S. is therefore vehemently opposed to import duties. It fears damage to companies, employees and consumers in both countries. The president of the National Foreign Trade Council, an organization for American exporters, calls the measure "a colossal blunder."
Republican Party members also reacted with shock to Trump's announcement. Even the U.S. trade representative, Robert Lighthizer, disagrees, The Wall Street Journal reported.
Mexican President Andres Manuel Lopez Obrador said on Friday that both countries should react with "caution." Foreign Secretary Marcelo Ebrard will fly to the U.S. to try to to change the U.S. government's mind. In a letter to his counterpart, Lopez Obrador wrote: "President Trump, you can’t solve social problems with taxes or coercive measures."