What Would Trump Tariffs Imply For Key Commerce Accomplice Mexico?

Washington:

US President Donald Trump has threatened to slap a 25-percent tariff on Mexican items on February 1, a transfer that analysts say would deal a heavy blow to Latin America’s second-largest economic system.

Mexican President Claudia Sheinbaum known as for “a cool head” in response to Trump’s commerce and different coverage bulletins.

What could be the implications for Mexico if its greatest buying and selling accomplice imposes tariffs?

– Would tariffs tip Mexico into recession? –

Mexico’s economic system is “arguably essentially the most susceptible” to US commerce protectionism, in keeping with London-based consultancy agency Capital Economics.

Mexico changed China in 2023 as the biggest buying and selling accomplice with america, which buys 83 % of its exports.

The electronics and automobile sectors could be significantly uncovered to tariffs as a result of half of their demand comes from america, Capital Economics mentioned.

The automobile sector alone generates 5 % of Mexico’s nationwide financial output, it famous.

The 2 sectors are additionally “those the place US safety considerations are excessive about Chinese language tech getting into the nation.”

In accordance with Oxford Economics, one other advisory agency, US tariffs and anticipated Mexican retaliation would weaken the Mexican peso, drive up inflation and “might push Mexico right into a technical recession.”

Tourism, nevertheless, may gain advantage if a weaker peso makes holidays in Mexico extra engaging, analysts mentioned.

– What leverage does Mexico have? –

Trump mentioned that he was pondering of enacting the tariffs on February 1 due to their failure to cease unlawful immigration and drug trafficking into america.

His threats are aimed toward “exerting stress and making an attempt to acquire concessions,” in keeping with former Mexican commerce negotiator Kenneth Smith.

Throughout his first time period (2017-2021), Trump efficiently used the specter of tariffs to stress Mexico to cut back the variety of Central American migrants arriving on the southern US border.

Arantza Alonso, an analyst in danger intelligence firm Verisk Maplecroft, mentioned that “by pushing again the imposition of tariffs till February 1, Trump is giving Mexico time to make concessions.”

Capital Economics thinks that cooperation on tackling flows of migrants and medicines might “be an efficient bargaining chip to stave off tariffs.”

Shopping for extra items from america and fewer from China might additionally assuage america, it mentioned.

Retaliatory agricultural tariffs that may hit Republican states like Texas, Nebraska, Iowa and the Dakotas particularly are another choice, Alonso mentioned.

– Is free commerce deal useless? –

In idea, Mexico and Canada ought to be protected in opposition to US tariffs by a regional free commerce settlement that was renegotiated below Trump.

“Imposing tariffs on all merchandise violates the treaty,” mentioned Diego Marroquin, a world commerce professional on the Wilson Middle, a Washington-based assume tank.

The US-Mexico-Canada Settlement (USMCA), which changed the earlier NAFTA accord on July 1, 2020, is because of be reviewed by July subsequent 12 months.

“This evaluation now seems poised to change into extra of a full-fledged renegotiation as President Donald Trump seeks to leverage the discussions to reshape North American commerce, migration, and safety, in addition to deal with China’s rising affect in regional provide chains,”  Council on International Relations specialists Shannon Okay. O’Neil and Julia Huesa wrote in a briefing be aware.

In accordance with the Mexican political danger consultancy EMPRA, indicators that Trump needs an early renegotiation recommend that he doesn’t plan to kill the USMCA.

“Trump stays dedicated to securing extra favorable phrases for the US, significantly with regard to the car trade,” it advised purchasers.

Sheinbaum lately hailed the USMCA as “among the best commerce agreements in historical past” and “the one method we will compete with Asian nations, significantly China.”

She offered a plan to interchange Chinese language imports with domestically produced items — an obvious bid to ease Washington’s considerations that Chinese language corporations need to use Mexico as a backdoor into america.

(Apart from the headline, this story has not been edited by NDTV employees and is printed from a syndicated feed.)