Agreement Between the United States and Mexico: A Respite from the Trade War

The compromise the two countries have reached on immigration should help fend off threats of a trade escalation, which could have been detrimental to the North American economy. But there are still doubts about the sustainability of this truce.

Donald Trump’s trade war has been put on hold. The United States and Mexico reached an agreement on immigration this weekend, thereby avoiding the trade tariffs that Washington intended to apply as of Monday.

Trump took to Twitter to hail a “historic agreement” between the two neighbors. “There is now going to be great cooperation between Mexico & the USA, something that didn’t exist for decades,” he congratulated himself. “Mexico was not being cooperative on the border in things we had, or didn’t have, and now I have full confidence, especially after speaking to their President yesterday, that they will be very cooperative and want to get the job properly done.”

His Mexican counterpart, Andres Manuel Lopez Obrador, who had delegated negotiations to his foreign minister, visited Tijuana this weekend at the U.S. border. He too welcomed the agreement, saying: “I’m not raising a closed fist, rather an open and frank hand to the president of the United States. We reiterate our willingness for friendship, dialogue and cooperation for the good of our two nations.”

A Sham Agreement?

The agreement allows Mexico to strengthen its southern border, including through the deployment of its National Guard. It will also need to expand the cooperation program set up several months ago with the United States, which requires it to receive and assist Central American asylum seekers while the U.S. reviews their applications.

In return, Washington will continue to fund development support programs in southern Mexico and Central America, as it did in December by committing to provide $5.8 billion. The State Department said it plans to contribute an additional $180 million and raise up to $2.5 billion from private sector loans.

Most of these points had already been approved in the past and led some members of the American press to claim over the weekend that the agreement was a sham. There is also some uncertainty regarding the role of agriculture in the compromise. Although the agreement does not address this issue, according to Trump, Mexico has committed to buying more agricultural products from the U.S., which could reduce the U.S. trade deficit with its neighbor. The agricultural sectors of the two countries are already very dependent on each other, and Washington had held the same position regarding negotiations with China, without that becoming a reality.

A Number of Doubts

Finally, the threat of tariffs is still looming over Mexico. The United States will be able to evaluate Mexico’s efforts in the fight against illegal immigration after 90 days. And if Mexico does not cooperate fully, “we can always go back to our previous position of tariffs,” threatened Trump on Twitter, adding, “but I don’t believe that will be necessary.”

Thus, observers fear that the respite will be short-lived. “We remain deeply concerned about using the threat or imposition of tariffs to press policy changes with our neighbors and allies,” announced Business Roundtable, a U.S. employers’ organization. Particularly since another issue should now occupy Washington: Trump must decide by mid-July, after meeting Xi Jinping, if he will tax all Chinese imports.

Author’s note: $350 Billion –

The amount of Mexican imports that were threatened with surcharges. Washington threatened to set these surcharges at 5% as of Monday, then increase them by five points every month, reaching 25% in October. Those would have made up the main tariffs imposed by the Trump administration, ahead of those imposed on China or those on steel and aluminum, and could have plunged Mexico into a recession and slowed down the U.S. economy.