The Trump administration has sent a message to the world with its new tariff threats against Mexico: No deal is ever a done deal.
That effect may be bigger than the immediate 5 percent tax on Mexican imports set to go into force June 10 and escalate to 25 percent over time.
Mexico had seemed to resolve its trade tension with the United States, in the form of a reworked Nafta now known as the United States-Mexico-Canada Agreement, or the U.S.M.C.A. The deal was moving toward fruition after the United States lifted steel and aluminum tariffs on its North American neighbors just days ago, and lawmakers in all three countries began considering it.
The new tariff threats, announced by President Trump in a tweet on Thursday, are aimed at pressuring the Mexican government to do more to combat migrants traveling from Central America to the U.S. border to seek asylum. It’s an issue not really related to trade policy at all. But the tariff threats amount to a vivid signal, especially to allies, that there is no permanent trade peace with the Trump administration, and could have significant consequences for future trade negotiations.
If you are working in a trade ministry in Brussels, Tokyo or Ottawa, how much confidence would you have that any deal you strike with American negotiators will have staying power?
“I don’t see how our trading partners will continue to negotiate with us as if we have any credibility going forward,” said Emily Blanchard, a trade economist at Dartmouth’s Tuck School of Business. “They’re going to have a much harder time selling any costly domestic reform or sacrifice that is a concession to the U.S., because the U.S. is acting like an erratic bully.”
The escalating trade war between the United States and China had put Mexico in a promising position, as a destination for businesses making decisions about where to locate their supply chains and wary of tensions with China. Mexico has higher labor costs than China, perhaps, but it has an appealing geographical proximity to the United States and the favorable trade relations that seemed to be codified by the U.S.M.C.A. deal announced at the White House last fall.
Even if the new tariff is canceled before it is scheduled to begin, the action sends a signal that any cross-border supply chain — for decades a crucial strategy for large multinational firms and quite a few smaller ones — is inherently risky.
“Mexico and Canada looked like a safe harbor because you just signed U.S.M.C.A.,” said Philip Levy, a senior fellow on the global economy at the Chicago Council on Global Affairs. “This action is saying, no, there really isn’t a safe harbor.”
The president appears to view tariffs as the solution to a wide range of foreign policy problems. It isn’t working.
So we’re going to tax Americans until Mexico stops allowing people from Central America to exercise their legal right to seek admission to the United States?
Seems pretty foolproof.
President Trump announced Thursday evening on Twitter, his preferred medium for policymaking, that he plans to impose a new tariff on all imports from Mexico, “until the illegal immigration problem is remedied.”
The tariff would begin at 5 percent on June 10 and gradually rise to 25 percent by October.
Mr. Trump persists in the falsehood that tariffs are paid by America’s trading partners. The truth is that Mexico would no more pay this tariff than it is paying for the construction of a border wall. The evidence is clear: Mr. Trump’s tariffs are taxes being paid by Americans.
This new tax would sit atop Mr. Trump’s tariffs on aluminum and steel imports, and Mr. Trump’s tariffs on Chinese imports, and the bill is adding up. The United States so far has collected about $19 billion in Trump tariffs. A full 25 percent tariff on Mexican goods could add as much as $87 billion a year to that total.
Mexico would most likely respond by imposing retaliatory tariffs, which is especially bad news for the probable targets: American farmers. About two weeks ago Mr. Trump ended a tariff on Mexican aluminum and steel, and Mexico ended a tariff on American farm goods. So much for that false dawn. Farmers may need to resume the search for new markets.
Taxation is always painful, and always the question is whether the benefits outweigh the pain. In this case, Mr. Trump is using a tariff as a cudgel to induce Mexico’s cooperation in keeping immigrants from America’s southern border. While the cost of the tariff would be paid by Americans, the Mexican economy most likely also would suffer a loss of sales to the United States.
Mr. Trump might succeed in pressuring Mexico to take stronger steps on immigration. Tariffs, however, are a very crude tool. Most of the immigrants seeking to cross the southern border are fleeing problems in Central America that are beyond the control of the Mexican government. Moreover, while Mr. Trump tends to refer to all of the immigrants as illegal, many are exercising a legal right to seek asylum.
Past administrations have sought cooperation from Mexico on immigration issues without disrupting economic relations between the two countries. Mr. Trump’s decision to mix the two issues threatens to disrupt both economies because the manufacturing sectors in Mexico and the United States are tightly intertwined. About two-thirds of trade between the countries is between factories owned by the same company, according to Deutsche Bank.
Other American trading partners with whom Mr. Trump is trying to negotiate new trade deals, including Japan and the European Union, presumably are having the same thought.
Last but not least, messing with Mexico weakens the Trump administration’s hand in its dealings with China. Mr. Trump’s tariffs on Chinese goods have persuaded some American companies to relocate production to Mexico from China. Those companies now face a more difficult choice. Mr. Trump and his advisers also may find it more difficult to rally international support for their efforts to persuade China to make changes in its economic policies.
Mr. Trump’s apparent determination to fight with all of America’s trading partners at once makes it harder to make progress on any particular front.
Once again, Mr. Trump is lashing out rather than acting strategically — and Americans will feel the pain.
Nearly 80 years later, President Trump’s former chief strategist, Stephen K. Bannon, has declared a “season of war” to push out problematic Republicans in midterm elections, just as Roosevelt tried to do to balky Democrats. But Roosevelt’s purge backfired. Not only did he fail to take out his targets, but he also emboldened them, all but dooming his domestic program for much of the rest of his presidency.
Whether Mr. Bannon’s purge will be more successful has become the consuming question in Washington these days.
.. said he might rein in Mr. Bannon’s planned assault on Republican incumbents. “Some of the people that he may be looking at, I’m going to see if we talk him out of that, because, frankly, they’re great people,” Mr. Trump said.
.. he called three incumbent Republicans —
- John Barrasso of Wyoming,
- Deb Fischer of Nebraska and
- Roger Wicker of Mississippi
— to assure them of his support in next year’s midterm elections.
.. voters resented the intervention and repudiated him by re-electing nearly all of his Democratic rivals.
.. “His attempt to purge the party of conservative Democrats proved to be a serious mistake,” said Robert Dallek, whose biography “Franklin D. Roosevelt: A Political Life” will be published next month. “He lost every primary contest except one, and 60 percent of the country disapproved of his purge.”
.. Roosevelt’s purge was part of a desire to force a party realignment.
.. In those days, both parties had liberals and conservatives. Roosevelt in effect was trying to make the Democrats the more uniformly liberal party while leaving the Republicans as the conservative party. He would fail, but in decades to come, that realignment would eventually occur on its own.
.. “His goal was two responsible, unified parties to replace, as he said, ‘Tweedledum and Tweedledee’ parties,” said Susan Dunn, a Williams College historian and author of “Roosevelt’s Purge,” the definitive book on the 1938 election. “To me, Trump’s purge is only about vindictiveness. He wants to strike out at and defeat the people who have dared to criticize him.”
.. Mr. Rove, who has sharply criticized Mr. Bannon’s efforts. “The lesson is it’s better to try to influence by encouragement than by opposition,” he said. “It’s important to keep focused on the main things people want you to keep focused on — what are the big issues of the day? And don’t let your personal pique guide your political actions.”
.. The confrontation came to a head when he sought to pack the Supreme Court by adding as many as six more justices to seize control of the bench, an idea that provoked fierce opposition in both parties and ultimately collapsed.
.. Roosevelt put together a team to organize a campaign against the conservative Democrats. The newspapers called it the “elimination committee” and labeled the campaign Roosevelt’s “purge,” a reference to Stalin’s terror in the Soviet Union.
.. He took on conservatives like Senators Walter F. George of Georgia, Ellison D. Smith of South Carolina, Millard E. Tydings of Maryland and Guy M. Gillette of Iowa. Mr. Smith, a fierce segregationist known as “Cotton Ed,” despised Roosevelt and referred to the New Deal as the “Jackass Age.” But Mr. Smith and the others won anyway.
.. “The good news for history,” he said, “is that this embarrassment taught him an important lesson: Don’t get too far out in front of the American voter, a lesson he applied just two years later as he carefully laid the groundwork for America’s entry into World War II.”