Donald Trump assures that the first day of his government, next January 20, will begin with a round of new tariffs on products imported from Mexico, Canada and China.
In a statement, the president-elect of the United States said that the tax will be 25% on imports that arrive to your country from Canada and Mexico. And that will impose an additional tariff 10% to products that have China as their origin.
The unexpected measure, he explained, will be part of his plan to combat undocumented migration and drug traffickingespecially fentanyl, two of the issues on which he based much of his campaign to return to the White House.
“Both Mexico and Canada have the absolute right and power to easily resolve this long-simmering problem. “We hereby demand that you use this power (…) and until you do, it is time for you to pay a very high price,” he stated.
The response from the two North American countries came immediately.
The president of Mexico, Claudia Sheinbaum, He said that solving problems requires cooperation and not “intimidation.”
From Canada, the government of Justin Trudeau He said he is open to negotiating.
And China warned that “no one will win in a trade or tariff war.”
For the Mexican economist Gerardo EsquivelTrump’s announcement corresponds to his well-known negotiating style, with a view to starting his government with an agreement under his arm.
He considers it unlikely that Trump would dare to start a tariff war in an economy as interdependent as the North American one: Mexico and Canada are the two largest trading partners of the United States.
“It is a call to start a negotiation with an advantage. But it seems to me that deep down we must understand that it is very difficult for it to happen. Because it would have very negative effects for all the economies involved,” says the professor at the National Autonomous University of Mexico and a doctor in Economics from Harvard University (USA).
BBC Mundo spoke with Esquivel about the implications of Trump’s tariff announcement and what effects it could have in the extreme event that it occurred.
Why did Trump choose this moment to make this announcement?
To begin with, it is a negotiating instrument that he is putting on the table to make a call to the countries on which he is threatening to impose the tariff.
The negotiation is more with Mexico and Canada than with China. With the Chinese in any way it will start a commercial conflict. The message is rather to try to find spaces for negotiation.
My reading is that it is a non-credible threat in the sense that it would be difficult for a president to impose such widespread tariffs on an entire group of products, knowing the negative impact it would have on his economy, with increased prices and impact on all economic activity. .
It is rather an approach that he makes, with his well-known style, at the beginning of negotiations. So that at the beginning of his administration he can announce some type of agreement between the countries involved and for him to declare himself victorious.
It is a call to start a negotiation with an advantage. But it seems to me that deep down we must understand that it is very difficult for it to happen. Because it would have very negative effects for all the economies involved.
Trump already used this strategy in 2018 and obtained an immigration agreement with Mexico, is this a new attempt to obtain another with Claudia Sheinbaum?
Let us remember that the flow of migrants that is arriving in the United States is no longer Mexican migrants. It is a flow of third countries that use Mexico as a transit country.
Mexico can help stop the flow with an agreement. It already did so in the last Trump administration, also with a threat of tariffs, and there was a collaboration agreement.
That is what President Trump is looking for, agreements of this nature in which he believes that the United States exercises its economic supremacy and can reach them in negotiations that he considers favorable.
One or the other cannot be stopped as long as the structural factors continue to be there. On the issue of drugs it is the demand of the United States and on the issue of immigration it is the economic inequalities and problems of various regions of the world, in Central and South America and even other regions, that seek to enter the United States. to improve their conditions.
Trump will surely ask for closer collaboration on this matter. And an agreement can be reached on that. It is not impossible that it be resolved, in the same way that it was announced five years ago. Mexico committed to carrying out certain tasks on the southern and northern borders to address the issue of migrants. That is what is subject to negotiation.
Agreements can be reached without reaching a situation as dramatic as what appears to be a trade war. None of the countries involved would benefit from a conflict of that nature.
How would a tariff hike plan hit the economy if it came into effect?
Imposing tariffs, of the magnitudes you are talking about, on all products, which is 40% of all products imported by the US, would imply an immediate increase in prices of many things and would have economic and social repercussions throughout the US. .and also possibly politics.
There are things that cannot be easily replaced. For example, the sale of agricultural products between Mexico and the US cannot be easily replaced and that would imply an increase in the cost of living for Americans.
In the case of inputs, the increases would limit the production of intermediate goods and final goods in the US. Automobiles would become more expensive from the start.
There would be a sequence of significant price increases on all products imported from the US and that would have an impact on the quality of life of Americans.
I don’t think President Trump is seriously announcing this, it would be shooting himself in the foot.
Rather, he is looking for a negotiation and it is not necessarily wrong. The region can reach an agreement convenient for all, which will be a more integrated economic region going forward.
And what consequences would it have for Mexico?
For Mexico, and Canada as well, it would have an impact because part of the effect of when costs rise is that part of it is transferred to prices, but another part is that demand for products decreases.
Agricultural producers would no longer be able to sell to the US and would suffer because they would have to place them in other markets in Mexico at cheaper prices.
We all lose: producers and consumers would lose from a change of this nature, at least in the short term. They are different sufferings for different sectors.
In Mexico, those that would suffer the most would be the export sectors, but then all value chains would be affected. It would all be a generation of self-inflicted damage to the region that we don’t need.
How can Mexico respond to these types of threats?
What is important for the countries involved, such as Mexico and Canada, is to keep a cool head to be able to reach agreements with a president like Donald Trump, who we well know is his way of negotiating. But ultimately agreements can be reached, as happened in the past.
Mexico has already dealt with Donald Trump, it has already negotiated with Trump, it has reached agreements with Donald Trump, it has a free trade agreement signed with Donald Trump… nor is the scenario as catastrophic as it might seem at first glance.
It doesn’t mean we should minimize it. It means that we consider that it is an initial position subject to negotiation. In this process we must have the medium and long-term vision that we can reach an agreement without reaching a trade war in which no one would win.
Is President Sheinbaum in a good position to confront Trump?
You are in a better position in the sense that a negotiation has already occurred. We already had a free trade agreement signed and established by President Trump.
López Obrador came to government in the middle of a negotiation process. He was in a more difficult position and Trump was seeking re-election. There were different circumstances.
Today Mexico is in a slightly more favorable position in the sense that it already knows what President Trump is like, what his interests are, it has already dealt with him once… so there are instruments to think that it is in a better position than before.
But clearly Trump wants to reach an additional negotiation than the one obtained in the past. You have to do all the prior work to reach a negotiation.
In the current context, there is talk that Mexico is being used as a “back door” by China to export to the US indirectly. Is there evidence of this?
Mexico is not being used as a back door. It is a concern that exists, President Trump and others have mentioned it, but there is no evidence that that is true.
Chinese products, automobiles, could enter the US under the rules of the Mexico-US-Canada Treaty. But that is not even happening because there is no production of Chinese origin that is being sold in the US. There are no Chinese investment plants in Mexico.
This accusation lacks support and is simply part of this political discussion that exists in Canada, where we remember that they are also in an electoral process and there are accusations. But it is part of the political life of the countries.
Already faced with the threat, Canada and Mexico are in the same boat. This shows that they must join forces for this negotiation.
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