Why tariff threat is unsettling – even after US-Mexico deaI

Businesses across the United States and Mexico breathed a sigh of relief after President Donald Trump announced a bilateral agreement Friday over border security that would avert his threatened tariff on Mexican goods.

No industry had been holding its breath more than the auto industry, for which a 5% to 25% tariff could have been disastrous given the huge cross-border flows of parts and cars.

“Our industry is [already] facing 25% tariffs on imported steel, 10% tariffs on imported aluminum, and a 25% tariff on the vast majority of inputs into our manufacturing process that come from China,” says Ann Wilson, the Motor & Equipment Manufacturers Association senior vice president of government affairs. “Additional [tariffs] would mean that suppliers and customers will have to look at the most cost-friendly place to manufacture the components in a vehicle.”

Yet even as an immediate risk has been dodged for factories and farms – at a time when both nations show signs of economic weakening – the wider message is more mixed. Mr. Trump’s tariff threat remains alive if Mexico’s border actions don’t prove strong enough, in his view. Given the president’s bluster-and-bash approach to dealmaking, it’s quite possible that the claimed progress with Mexico could unravel. And even if it doesn’t, the U.S. willingness to weaponize tariffs against a close trading partner may have frayed diplomatic trust.

“What the president is weakening is much bigger than most people understand immediately,” says Earl Anthony Wayne, a former U.S. ambassador to Mexico. “It is really threatening the very basic set of principles on which American competitiveness is built. It is built on doing things with our neighbors.”

The threat of tariffs started late last month as migrant apprehensions spiked at the southern border. Mr. Trump justified his actions by calling the situation at the southern border a “national emergency,” a designation that allowed him additional leeway in his response.

The ploy appears to have worked – although the extent to which the deal had been agreed upon prior to the Trump threat flared into its own separate debate over the weekend. Mexico has agreed to roll out 6,000 National Guard troops, mostly on its southern border, to crack down on migrants traveling north towards the U.S., and to increase the reach of a program that requires asylum-seekers in the U.S. to wait in Mexico.

Mexico’s enhanced border security rollout could score the president points with his immigration-conscious base. Many Trump supporters praised the announcement. And GOP Sen. Ron Johnson of Wisconsin said the president used the tariff threat “brilliantly” as leverage for border security.

But any political win is tenuous. Mexico did not agree to become a “safe third country,” which would allow the U.S. to reject asylum-seekers that passed through Mexico but did not first apply for asylum there. Mr. Trump also tweeted Monday that the deal had elements that would require approval by Mexico’s legislature, and that “if for any reason the approval is not forthcoming, Tariffs will be reinstated!”

And the concessions offer no solution to the real problems – like gang violence, government corruption, climate change, and overall lack of education and employment opportunities – driving immigrants from Guatemala and Honduras northward through Mexico. Trust between the two countries is breaking down right as they’re seeking ratification of a new U.S.-Mexico-Canada Agreement on trade.

“It’s a strange thing to, with one hand, say we’re entering into a new zero-tariff trade agreement and, with the other hand, say I’m going to impose a five percent tariff on you to coerce you into doing something that I want you to do, separate from trade,” says Joel Trachtman, an international law professor at the Fletcher School of Law and Diplomacy at Tufts University. “It seems really strange to treat Mexico, our ally and longtime friend, that way.”

Economies joined by trade

Experts worry the two nations are so economically intertwined that tariffs would cause serious harm. Mexico’s gross domestic product already contracted in this year’s first quarter. And by one forecast, a 5% tariff on Mexican goods would cost the U.S. economy $41 billion and more than 400,000 jobs. The specter of these losses made Mr. Trump’s proposals widely unpopular with U.S. business leaders and Republican lawmakers, and their resulting pushback likely contributed to the signing of the deal.

For Glenn Altschuler, a professor of American Studies at Cornell University, the tariffs were a perversion of trade policy.

“The trade war with China is based on some premises by the Trump administration that should be of concern to Americans and are relevant to the issue of trade,” he says. “The proposed tariffs on Mexico actually have nothing to do with trade. They’re about an immigration issue and are being used as a political tool outside the realm of trade.”

Few in Mexico see Friday’s agreement as the end of U.S. demands around border security. Both countries are expected to check in at the end of July to see how measures agreed to last week are playing out. However, uncertainty around what Mr. Trump and his immigration-hawk advisors will deem a success already has some bracing for another round of economic threats from the U.S.

“There are plenty of scenarios, unfortunately, where we will arrive once again at a situation like last week,” says José María Ramos, investigator in the public administration department of the College of the Northern Border (COLEF) in Tijuana. “Mostly because it’s completely unclear what quantity of migrants Mexico has to stop in order to satisfy the U.S.”

Mexico’s new administration, inaugurated in December, took office promising not to criminalize migration, and created a number of initiatives, like humanitarian and work visas, that observers say incentivized migration. But President Andrés Manuel López Obrador’s administration has deported nearly 70 percent more migrants in April and May than the outgoing administration did during the same timeframe in 2018.

Those working on migration in the region are concerned about how Friday’s agreement will play out. They point out that as of June 5, more than 10,000 Central Americans have already been returned to Mexico from the U.S. via the Migrant Protection Protocols program, according to Mexico’s National Institute of Migration.

“What they seem to be saying is that they’re going to return everyone,” says Gretchen Kuhner, director of the NGO Institute for Women in Migration in Mexico City.

That would have hefty economic implications for Mexico, which has promised to provide education and healthcare for this population.

“What this [agreement] is going to do is that once people get to the border they’re not going to turn themselves in anymore. They’ll rely more on smugglers so they can enter the U.S. undetected, ” says Ms. Kuhner.

She says what’s really going to bring down the number of migrants and asylum seekers at the U.S. border are much longer-term steps, like economic development efforts in Central America.

“The political timing doesn’t allow for long-term solutions,” she says.

‘Space for cooperation’

Moving ahead, Mexico is likely to continue working to appease the U.S. Many citizens say they’re content with Mr. López Obrador’s approach to Trump’s threats last week. Mr. López Obrador responded with calls for continued friendship between the U.S. and Mexico, and his approval ratings went up by four points between May 27, the day of Mr. Trump’s announcement of potential tariffs, and the following Tuesday.

An incentive for Mexico to discuss solutions to migration, even if under threat of tariffs, is that “it’s a recognition that migration is a problem with humanitarian, security, and development implications for both the U.S. and Mexico. It requires U.S. cooperation,” which Mexico gets, in a way, through negotiations like the ones that took place in the lead-up to Friday’s announcement, says Dr. Ramos.

“We are living in a complex and interesting time on the U.S.-Mexico border, but there is space for cooperation,” he says.

A key question is whether that will happen with a U.S. president who leans on immigration as an issue that can energize his base heading toward another election.

For one thing, experts worry that indiscriminately invoking national emergencies for political gain sets a dangerous precedent.

“President Trump is the first one to use that discretion to declare an emergency or a national security threat so promiscuously,” says Mr. Trachtman.

Mr. Wayne, the former ambassador, says the diplomatic and economic instability is not worth the perceived political gain.

“What’s the better kind of a relationship: tackling problems together, or do you want a relationship where there’s a deep resentment and only a grudging cooperation where it has to be done and then looking strongly for other options? It’s just not a good way to build a long term partnership.”

Staff writer Mark Trumbull contributed to this story from Washington.