The Jury Talks Back

5/31/2019

President Trump Starts Trade War With Mexico

Filed under: Uncategorized — Dana @ 6:48 am

[guest post by Dana]

President Trump has started another trade war. This time with Mexico. Tweeting late yesterday afternoon, the President said:

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 migrants coming through Mexico, and into our Country, STOP. The Tariff will gradually increase until the Illegal Immigration problem is remedied,..at which time the Tariffs will be removed. Details from the White House to follow.

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Additionally, the White House said in a statement:

The tariff on all goods by land, sea, and air from Mexico will hike to 10 percent on July 1 — and potentially increase substantially from there.

“If Mexico still has not taken action to dramatically reduce or eliminate the number of illegal aliens crossing its territory into the United States, Tariffs will be increased to 15 percent on August 1, 2019, to 20 percent on September 1, 2019, and to 25 percent on October 1, 2019,” Trump said in a statement released later by the White House on Thursday. “Tariffs will permanently remain at the 25 percent level unless and until Mexico substantially stops the illegal inflow of aliens coming through its territory.”

…”Thousands of innocent lives are taken every year as a result of this lawless chaos. It must end NOW! … Mexico’s passive cooperation in allowing this mass incursion constitutes an emergency and extraordinary threat to the national security and economy of the United States.”

Reporting that the Dow Jones futures hadn’t moved until the President’s tweet, Investors Business Daily reports on the downside:

This could undermine efforts to ratify the U.S.-Mexico-Canada Agreement (USMCA), the revision to Nafta, just as the three countries begin a push to approve it. The U.S. already is embroiled in an escalating China trade war and still mulling global auto tariffs.

GM stock fell 1.5% and Ford stock 2% in late trade. U.S. tariffs on Mexico would affect supply chains for General Motors and Ford. Mexico is a big producer of cars, trucks and parts.

GM, Ford and other automakers already are worried about looming global auto tariffs, though Trump recently delayed that trade-war decision by up to 180 days.

Further reaction to the announcement saw the “Dow Jones industrial average futures fall 200 points, or 0.8%, while Mexico’s peso tumbled 2% against the U.S. dollar.”

Here are the numbers :

Goods imports from Mexico totaled $346.5 billion in 2018 (ustr.gov/COUNTRIES-REGI…)

A 5% tariff on that flow of goods amounts to a $17 billion tax increase.

In 2018, we imported $93 billion of vehicles, $64 billion of electrical machinery, $63 billion of machinery, $16 billion of mineral fuels, and $15 billion of optical and medical instruments from Mexico.

Mexico was the second largest supplier of imports to the United States in 2018. So, we’re imposing a tax on *everything* Americans buy from one of our largest trading partners.

…Mexico is our largest supplier of agricultural products: fresh vegetables ($5.9 billion), other fresh fruit ($5.8 billion), wine and beer ($3.6 billion), snack foods ($2.2 billion), and processed fruit & vegetables ($1.7 billion).

And here is the outlook for California if the tariffs are imposed:

The state imported $44 billion in goods from Mexico in 2018, making it the third-largest importing state for goods from Mexico, according to the California Chamber of Commerce.

Mexico is also California’s number one export market, buying $30.7 billion in goods last year, 17% of all California exports.

Computers and electronic products remained the state’s largest exports, accounting for 25.8% of all California exports to Mexico.

The tariffs would reportedly apply to all Mexican imports.

If you recall, it was a little over a week ago that President Trump chided White House economic adviser Larry Kudlow and advised him “not to worry about how tariffs would impact U.S. businesses.” This after Kudlow publicly (and rightfully) contradicted the President by admitting that “yes, both sides [U.S. and China] will pay in these things.”

Even Trump’s supporters in Congress are having a hard time backing him in this, for good reason:

“This is a misuse of presidential tariff authority and counter to congressional intent,” said Sen. Charles E. Grassley (R-Iowa), chairman of the Senate Finance Committee. “I support nearly every one of President Trump’s immigration policies, but this is not one of them. I urge the president to consider other options.”

President Andres Manuel Lopez Obrador of Mexico is also imploring President Trump to reconsider this move, and to enter into negotiations instead.

Just how much of a decrease in border crossings would be necessary to signal the tariffs a success remains unclear:

“We are going to judge success here by the number of people crossing the border and that number needs to start coming down immediately in a significant and substantial number,” Mulvaney said.

–Dana

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