President Trump’s plan to slap new tariffs on Mexican imports, weeks after escalating his trade war with China, leaves the United States fighting a multi-front campaign that threatens more instability for manufacturers, consumers and the global economy.
The president’s bombshell announcement that he would impose 5 percent tariffs on Mexican imports, with the possibility of raising them to 25 percent if Mexico doesn’t stop migrants from crossing into the United States, left some economists fearing there were few limits to Trump’s appetite for trade conflict.
“In our view, if the U.S. is willing to impose tariff and non-tariff barriers on China and Mexico, then the bar for tariffs on other important U.S. trading partners, including Europe, may be lower than we previously thought,” Barclays economists said in a research note. “We think trade tensions could escalate further before they de-escalate,” Barclays added.
Adam Posen, president of the Peterson Institute for International Economics, called Trump’s move against Mexico a turning point for financial markets and the U.S. economy.
In global markets Friday, investors spooked by new tariff threats sought safety in German government bonds and the Euro rather than their customary dollar-denominated havens. This “seems to me an indicator that the concerns about the U.S. are rising,” Posen said.
The president’s latest move rocked business leaders who were already scrambling to reshape supply chains to avoid fallout from the U.S. confrontation with China. The added uncertainty may paralyze executives who can’t be sure their next supply chain location will be any safer than their last.
“A lot of companies feeling pressure to get out of China are looking at Mexico if they want to serve the US market, Vietnam if they’re more focused on Asia,” said William Reinsch, a former Commerce Department trade official. “Trump’s action yesterday scrambles all those plans.”
In one example of a company caught in the crossfire, GoPro of San Mateo, Calif., last month announced it would move manufacturing of some of its cameras from China to Mexico, so that it could stop paying tariffs to import them to the United States — tariffs resulting from the U.S. trade war with China. Weeks later, GoPro now faces new tariffs to import those goods from Mexico. The company declined to comment Friday.
As U.S. companies race to find new tariff-free places to manufacture, so far few have reported returning production to the United States, despite the president’s stated aim of using trade policy to help bring jobs back home. Many are still seeking alternative locations overseas, where labor is cheaper.
Trump said he would impose the new tariffs because the Mexican government wasn’t doing enough to stem the flow of migrants, many of whom travel through Mexico from Central America. Some White House officials who support Trump’s approach believe the threat of tariffs is the only way to get the attention of Mexican leaders.
The Mexican government tried to defuse the tension Friday, saying the two sides would meet in Washington on Wednesday for high-level talks.
If no solution is found, Mexico is certain to impose retaliatory tariffs on U.S. goods, with likely targets including U.S. pork, beef, wheat and dairy products, said Former Mexican diplomat Jorge Guajardo.
Some prominent Republicans, including Senate Finance Chairman Charles E. Grassley, raised concerns that the new tariffs could threaten a trade agreement the Trump administration clinched only months ago with Mexico and Canada, to replace the 1994 North American Free Trade Agreement.
Others said the about-face treatment of Mexico would damage Trump’s ability to negotiate trade deals it is pursuing with other partners, including China and Europe.
“You can’t negotiate a trade agreement with someone and then turn around and whack them,” said Douglas Holtz-Eakin, a Republican economist and former Congressional Budget Office director.
In late March, Trump threatened to shut the entire southern border to curb illegal immigration, but backed down a week later after an outcry. That has left some wondering how seriously they should take the latest tariff threat.
If Trump follows through with new tariffs on Mexico, it would hurt U.S. economic growth and increase the possibility of the Federal Reserve reversing course and cutting interest rates this year, economists said.
“The drag to the US economy could be meaningful, especially if the tariffs reach 25%,” the upper limit that Trump has set, Bank of America Merrill Lynch economists wrote Friday. Even if the tariff remains at 5 percent, the effective cost could be higher because many parts cross the border several times as products are assembled, and the tariff must be paid upon each crossing into the United States.
U.S. automakers will be among the principal casualties. Last year, the United States imported roughly $350 billion in merchandise from Mexico, including about $85 billion in vehicles and parts, according to the International Trade Administration.
A full 25 percent tax “would cripple the industry and cause major uncertainty,” according to Deutsche Bank Securities.
“The auto sector – and the 10 million jobs it supports – relies upon the North American supply chain and cross border commerce to remain globally competitive,” said Dave Schwietert, interim president of the Auto Alliance, an industry group. “This is especially true with auto parts which can cross the U.S. border multiple times before final assembly.”
“Widely applied tariffs on goods from Mexico will raise the price of motor vehicle parts, cars, trucks, and commercial vehicles – and consumer goods in general — for American consumers,” the industry group said. “The potential ripple effects of the proposed Mexican tariffs on the U.S. North American and global trade efforts could be devastating.”
Consumers could pay up to $1,300 more per vehicle if the tariffs are implemented, according to Torsten Slok, chief economist for Deutsche Bank Securities.
Retailers, technology companies and textile manufacturers also will be hurt. U.S. mills now ship yarn and fabric to Mexico, where it is turned into apparel and exported back to American retailers. Last year, the U.S. textile industry exported $4.7 billion in yarn and fabrics to Mexico, its largest single market.
“Adding tariffs to Mexican apparel imports, which largely contain U.S. textile inputs, would significantly disrupt this industry and jeopardize jobs on both sides of the border,” said Kim Glas, president of the National Council of Textile Organizations.
The new dispute with Mexico came as the U.S.-China trade conflict continued to deepen.
China on Friday announced it would establish a blacklist of “unreliable” foreign companies and organizations, effectively forcing companies around the world to choose whether they would side with Beijing or Washington.
The new “unreliable entities list” would punish organizations and individuals that harm the interests of Chinese companies, Chinese state media reported, without detailing which companies will be named in the list or what the punishment will entail.
Chinese reports suggested the Commerce Ministry will target foreign companies and groups that abandoned Chinese telecom giant Huawei after the Trump administration added Huawei to a trade blacklist this month, which prohibited the sale of U.S. technology to the Chinese company.
At a time when Western corporations have cut back executive travel to China after authorities detained two Canadians on national security grounds in December, the new blacklist sent another shock wave through the business community.
“I think foreign and especially U.S. firms now have to worry that China is creating a new ‘legal pretext’ to at least impose exit bans on foreign individuals who make this new list, if not worse,” said Bill Bishop, the editor of the Sinocism newsletter, referring to the Chinese practice of not allowing designated foreigners to leave China.
Aside from the new blacklist, China in recently days also escalated threats to stop selling the U.S. so-called rare earths — 17 elements with exotic names like cerium, yttrium and lanthanum that are found in magnets, alloys and fuel cells and are used to make advanced missiles, smartphones and jet engines.
Analysts said it could take years for the United States to ramp up rare-earths production, after its domestic industry practically disappeared in the 1990s. Roughly 80 percent of U.S. imports of the material come from China, according to the United States Geological Survey.
The People’s Daily, the Communist Party’s official mouthpiece, carried a stark warning for the United States this week in an editorial about rare earths: “Don’t say we didn’t warn you.”
That commentary surprised China experts because the People’s Daily, which often signals official positions with subtly codified language, uses that phrase sparingly: It famously appeared before China launched border attacks against India in 1962 and Vietnam in 1979.
Fox Hosts turn on each other over Trump & Cohen
If Donald Trump leaves office before four years are up, history will likely show the middle weeks of May 2017 as the turning point.
.. If Trump has nothing to hide, he is certainly jumpy whenever the subject comes up and his evident worry about it has caused him to make some big mistakes.
.. Though younger and more composed, Kushner is a lot more like Trump than is generally understood.
- Both of them moved their father’s businesses from the New York periphery to Manhattan.
- Like his father-in-law, Kushner came to Washington knowing a lot about real estate deals but almost nothing about government.
- Both entered the campaign and the White House unfamiliar with the rules and laws and evidently disinclined to check them before acting.
.. Thus, Kushner has reinforced some of Trump’s critical weaknesses.
.. Kushner, who has a high self-regard, has taken on a preposterous list of assignments.
.. He was able somehow (likely through his own leaks) to gain a reputation—along with his wife, Ivanka Trump—as someone who could keep the president calm and prevent him from acting impulsively or unwisely.
.. Richard Nixon, who was a lot smarter than Trump is, similarly misread the way the public would react when he arranged for the firing of his special prosecutor, Archibald Cox
.. Mueller’s investigation is limited to considering criminal acts.
.. His purview doesn’t include determining whether Trump should be held to account for serious noncriminal misdeeds he or his associates may have committed with regard to his election
.. of the three articles of impeachment adopted by the Judiciary Committee against Richard Nixon in 1974, the most important was for “abuse of power.”
.. Unless a single act is itself sufficiently grave to warrant impeachment—for example, treason—a pattern of behavior needs to be found. That could involve, for example, emoluments or obstruction of justice... Many of what seemed disparate acts—well beyond the famous break-in in the Watergate complex and the cover-up—were carried out in order to assure Nixon’s reelection in 1972, and they amounted to the party in power interfering with the nominating process of the opposition party. That way lay fascism... By definition, impeachable offenses would appear to concern conduct only during a presidency. But a number of constitutional law scholars, including the Harvard Law professor Laurence Tribe, who was dubious at first, believe that if a president or his associates working on his behalf acted corruptly and secretly to rig the election, then the preinaugural period should be included... Trump asked for Flynn’s resignation only on February 13, after stories about Yates’s warning appeared in the press—and then, two days after he fired him, the president called Flynn “a wonderful man.”.. weirdly, recently told aides that he’d like to have Flynn back in the White House... Flynn, in conversations with outgoing national security adviser Susan Rice during the transition, asked that the Obama administration hold off on its plan to arm Kurdish forces to help the effort to retake Raqqa, the ISIS capital in Syria. Since Flynn was a paid lobbyist for the Turkish government, which strongly opposed the plan, this action could possibly lead to a charge of treason... Flynn was leading the Russians to believe that they’d receive much better treatment under a President Trump and the Russians went along... A big question is whether Flynn discussed such important policy matters with the Russians without the knowledge of the president-elect... Trump tweeted: “Great move on delay (by V. Putin)—I always knew he was very smart!”.. Brennan testified he was worried that the Russians may even have recruited some Americans to cooperate with their effort to tilt the election... Intelligence analysts picked up conversations by Russians in which they bragged that they’d cultivated Flynn and Manafort and believed they would be useful for influencing Trump. (This doesn’t prove guilt on the part of either man.).. Laurence Tribe is gathering what he believes are impeachable offenses committed by Trump.2.. Tribe sees Trump flouting the constitutional ban on accepting “emoluments”—.. Trump’s firing of Comey for, as he ultimately admitted, “this Russia thing.”.. Trump’s saying to Russia’s foreign minister Sergey Lavrov and to Ambassador Kislyak, of firing Comey: “I faced great pressure because of Russia. That’s taken off.”.. There were also Trump’s efforts very early in the administration to get Comey to pledge “loyalty” to him.. In another form of pressure, Trump asked Comey when the FBI would announce that he wasn’t under investigation. Comey didn’t respond... Before it was revealed that Comey had taken notes of their conversations, Trump made a not-very-veiled threat that Comey “better hope that there are no ‘tapes’ of our conversations.”.. Where are all the leaks coming from? Many Republicans want to make this the issue rather than what the leaks reveal, but the fact that they keep coming is a sign of the state of near collapse of the White House staff... It’s not an exaggeration to say that Trump has the most unhappy staff ever, with some feeling a higher duty to warn the public about what they see as a danger to the country... Trump is a nearly impossible person to work for:
- he screams at his staff when they tell him something he doesn’t want to hear;
- he screams at them as he watches television news for hours on end and sees stories about himself that he doesn’t like, which is most of them.
.. Leaks are also being made by the intelligence community, many of whom see Trump as a national menace.
.. McMaster has yet to recover his reputation from having emphatically refuted things the Post story didn’t say.
.. Trump’s reckless act is believed to have endangered the life of an Israeli intelligence asset who had been planted among ISIS forces, something extremely hard to pull off.
.. Rosenstein found himself in a meeting with Trump and Attorney General Jeff Sessions (who had supposedly recused himself from any dealings on the campaign and the Russia matter) and under pressure to write a memo expressing his own strong negative views of how Comey had handled Hillary Clinton’s e-mail case. The choices before Rosenstein were to write the report, knowing that Comey was going to be fired anyway, or refuse to and resign or be fired. Then what use could he be?
.. he spoke melodramatically of his anguish in having to decide between two choices: to “speak” or to “conceal.” But many observers believed that he had a third choice: quietly to get a warrant and check out some of the e-mails that had traveled from Clinton’s laptop to her close aide Huma Abedin’s to that of Abedin’s then-husband Anthony Weiner before reopening an investigation, much less announcing one and perhaps affect the outcome of the election.
.. Comey’s testimony also angered Democrats by wildly exaggerating the number of Clinton’s e-mails that had landed on Weiner’s laptop—“hundreds and thousands,” he said, when actually there had been just a handful.
.. Comey’s comment that the thought that his actions may have affected the election made him “mildly nauseous” enraged Trump.
.. Everyone who hewed to the White House line that the firing had been based on Rosenstein’s memo, including Pence, was now embarrassed and lost credibility with the press and the public.
.. the respected Cook Report anticipates substantial Republican losses in the House. Republicans are starting to panic.
..Their challenge is how to overcome the twin blights of
- Trump’s chaotic governing and
- his lack of achievements on Capitol Hill
.. unlike Nixon, he can also make use of social media, Fox News, and friendly talk shows to keep them loyal.
.. Trump is, for all his deep flaws, in some ways a cannier politician than Nixon; he knows how to lie to his people to keep them behind him.
.. The critical question is: When, or will, Trump’s voters realize that he isn’t delivering on his promises,
- that his health care and tax proposals will help the wealthy at their expense,
- that he isn’t producing the jobs he claims?
- His proposed budget would slash numerous domestic programs, such as food stamps, that his supporters have relied on heavily. (One wonders if he’s aware of this part of his constituency.)