Trump’s Mexico Tariffs: A ‘Foolish’ Policy

June 6, 2019

The US has massive trade with Mexico, in both directions, which would be seriously impacted by Trump's proposal to impose a progressively rising tariff on all Mexican imports until Mexico limits migration to the US. Manuel Perez Rocha of IPS discusses the consequences  

The US has massive trade with Mexico, in both directions, which would be seriously impacted by Trump's proposal to impose a progressively rising tariff on all Mexican imports until Mexico limits migration to the US. Manuel Perez Rocha of IPS discusses the consequences  


Trump's Mexico Tariffs: A 'Foolish' Policy

Story Transcript

GREG WILPERT: It’s The Real News Network, and I’m Greg Wilpert in Baltimore.

Vice President Mike Pence and other top administration officials are meeting with Mexico’s foreign minister on Wednesday to find a last minute agreement that would avoid the potentially dire economic consequences of President Trump’s threat to impose tariffs on all Mexican imports. Last week, Trump had tweeted “On June 10th, the United States will impose a 5% tariff on all goods coming into our country from Mexico, until such time as illegal immigrants coming through Mexico, and into our country, stop. The tariff will gradually increase until the illegal immigration problem is remedied.”

This week, Republicans in Congress such as Senate Majority Leader Mitch McConnell expressed their opposition to Trump’s decision to impose tariffs on all Mexican products by June 10. However, despite the opposition, it seems unlikely that enough Republicans in the House would override a veto of a resolution against the tariffs. Meanwhile, Mexico’s President Andres Manuel Lopez Obrador, also known by his initials AMLO, said on Tuesday that he is optimistic that a deal will be reached with the US before June 10.

ANDRES MANUEL LOPEZ OBRADOR: An agreement will be reached before June 10 before that tariff comes into effect or is imposed.

GREG WILPERT: Joining me now to take a closer look at the impending tariff conflict between the U.S. and Mexico is Manuel Perez Rocha. He’s an associate fellow at the Institute for Policy Studies in Washington D.C., and an associate of the Transnational Institute in Amsterdam. Thanks for joining us today, Manuel.

MANUEL PEREZ ROCHA: Thank you for having me.

GREG WILPERT: So, news reports suggest that Trump is determined to move ahead with the tariffs on Mexican imports next week. If that were to happen, what U.S. industries and what states would be most affected? And what would it mean for U.S. consumers more generally?

MANUEL PEREZ ROCHA: There is very much to fear. I mean, there are basic calculations that indicate that the cost of one of Trump’s planned tariffs to Mexico will be paid basically by U.S. citizens. Some say that some households might end up paying as much as $600-800 in the raised costs. The most important victim, of course, will be the auto industry, including, significantly, the auto parts industry, or also other manufacturers like computers, telephones, televisions. And also products like beer, and even the avocado we import in this country to make guacamole.

So it is what some called an act of self-destruction. It is like shooting on your own foot. It’s really foolish, I would say. And even the Republicans know it. So I think that it’s very important to see the relation with Mexico in other terms. Also, the planned United States–the signing of the U.S. NCA, the new trade agreement that will replace NAFTA will be in great peril. I don’t think the Mexican government would really pass it on if these tariffs are applied, or the Mexican Congress, I mean. And there are many other products that also the United States exports to Mexico, and Mexico would very surely retaliate. I’m talking about $42 billion of machinery that are exported to Mexico, and then electrical machinery $41 [billion]. Vehicles and vehicle parts $21 billion, mineral fuels $20 billion, and so on. There are so many things that are exported from California, Texas, and other states in the U.S. that would suffer severely.

GREG WILPERT: And looking at the other side, at the Mexican side, what effect would these tariffs have on Mexico itself?

MANUEL PEREZ ROCHA: It will have the effect of affecting mainly companies that are transnational companies. Exports from Mexico have very little content, very little national content. So as I have said in the past, and this is something I’ve been advocating, scrapping NAFTA, tariffs of the so-called Mexican exports, wouldn’t be such a disaster in itself for the real Mexican economy. The crisis for Mexico will be much more political, perhaps financial. Without NAFTA, the trade of Mexico and the United States would revert to WTO rules, which are similar to NAFTA’s. And withdrawing, which organizations in Mexico are actually advocating, withdrawing from NAFTA would effectively eliminate many other rules under NAFTA, like investor rights, that handcuff Mexico. You know, there is the investor state dispute settlement. Mexico is the third more sued country in the world at the World Bank’s international center for the settlement of disputes.

So for Mexico itself, or the Mexican economy, the real economy of Mexico, I think that tariffs wouldn’t be so devastating, as much as for the transnational companies, mainly American companies that export from Mexico to the United States.

GREG WILPERT: Interesting. I want to get back to that point a little bit later. But first, the resistance to these tariffs even within the Republican camp seems to be quite substantial. And Mexico, too, seems to be quite willing to do as much as possible to appease the Trump administration on the immigration issue. I mean, they’ve already made several decisions to try to help slow the flow of immigrants. Now, if they do come to an agreement, or if, that is, if Mexico is willing to do something about the immigration issue, if so, what kind of an agreement would you foresee, and how likely might it be that it actually happens before June 10?

MANUEL PEREZ ROCHA: Well, the thing is that Trump has overseen an agreement [inaudible] with the Mexican government. And in the letter that I’m AMLO sent to the U.S. government a couple of days ago, he said that he had proposed opting for cooperation in development and aid for the Central American countries with productive investments to create jobs and resolve this painful situation. I’m reading from his letter. So the agreement I think [inaudible] brought the foreign minister of Mexico and Mike Pence and others, I hope they’re reaching today, is to really push for this agreement that they already have, that was to invest with billions of dollars in the south of Mexico and Central America to promote real development and help people not to have the need to migrate.

GREG WILPERT: Now, the prominent liberal economist Paul Krugman recently wrote an opinion column in the New York Times where he basically argued that tariffs in general are a bad idea, and that imposing them means violating international treaties such as NAFTA and the World Trade Organization. Now, the effect would be not only attacks on U.S. consumers, as we’ve already mentioned, but more importantly it would mean a breakdown of regulated international trade, and the possible start of global trade wars, which then could mean economic decline for everyone. Now, I’m just wondering, what’s your reaction to that analysis that Krugman presents? I mean, especially in light of what you already said about the potential benefits that breaking with NAFTA would have? I mean, are there circumstances where tariffs would be justifiable, and where basically less free trade would actually be a good thing?

MANUEL PEREZ ROCHA: Well, that’s a good point. I think Krugman has it right that this nationalism, exacerbated nationalism, presented by people like Donald Trump and others is just a regression to the past. We need trade agreements, but we need trade agreements that work for the people, and not only large transnational corporations. So I don’t agree with the tariffs that Trump is proposing for Mexico, because they are unilateral, and very aggressive. And I think we have to dismantle the present trade system that works only for transnational corporations, but in a methodical way, and not just rushing the whole system like President Trump is intending to. We have alternatives. We have so many documents that come from the farming sector, from the trade unions, from environmentalists on how to make trade agreements better.

GREG WILPERT: OK. Well, hopefully we’ll come back to you once it’s clear which direction these things are going, but we’re going to leave it there for now. I’m speaking to Manuel Perez Rocha of the Institute for Policy Studies in Washington D.C. Thanks again, Manuel, for having joined us today.

MANUEL PEREZ ROCHA: Thank you for everything.

GREG WILPERT: And thank you for joining The Real News Network.