If President Trump wants his free trade deal passed, he has a funny way of showing it. On the same day that Vice President Mike Pence met Canadian Prime Minister Justin Trudeau in Ottawa, to push the United States-Mexico-Canada Agreement through Parliament, the President tweeted out an entirely new trade policy. The United States would impose a 5% tax on all imports from Mexico, “until such time as illegal migrants coming through Mexico, and into our Country, STOP.” The unexpected return of Tariff Man sent shockwaves through the continent and financial markets Friday.
While the policy-by-tweet appears to have come out of left field, it also reflects continued frustration with the administration in fulfilling its signature campaign promise: stopping illegal immigration. Border crossings last month were at a 12-year high, and, per acting Homeland Security Secretary Kevin McAleenan, the presence of children and families is overwhelming both DHS and Customs and Border Protection resources. Simply put, the government “cannot provide appropriate conditions for them,” as “Health and Human Services is out of bed space.”
The President’s new plan wasn’t particularly well-received on Capitol Hill. Senate Finance Chairman Chuck Grassley (R-IA) put it bluntly. “Following through on this threat would seriously jeopardize passage of USMCA, a central campaign pledge of President Trump’s and what could be a big victory for the country.” Sens. Rob Portman (R-OH) John Cornyn (R-TX), and Joni Ernst (R-IA) also urged the President to reconsider and change course.
The reception was even colder in Mexico. “‘America First’ is a fallacy,” Mexico’s left-wing populist President, Andres Manuel Lopez Obrador, responded in a letter. “Because until the end of times, even beyond national borders, justice and universal fraternity will prevail.” AMLO said Mexico is already doing what it can to stop migration through the country, but would not retaliate against his counterpart’s threats, because “social problems are not solved with duties or coercive measures.” He added, “I don’t believe . . . in ‘an eye for an eye.’”
Wall Street didn’t take the shock well Friday either. The Dow sank 355 points Friday, dropping below 25,000 for the first time since January. The United States imported $346.5 billion in goods from Mexico last year, and there are widespread fears his new tariffs could have devastating consequences across key industries and states. The auto industry could be particularly hard hit. “Trade with Mexico is basically all about the supply chain,” said Deutsche Bank Securities chief economist Torsten Slok. “Which essentially is all about cars.” Manufacturing, electronics, and agriculture might also be impacted.
“If you don’t like the weather here,” goes the saying in numerous American locales, “wait about five minutes.” That, more than anything else, might be the guiding ethos of this administration. Trump’s disruptive, impulsive nature often has him putting out fires as quickly, and without warning, as he starts them. The White House laid out no specifics for what would constitute Mexican compliance with their demands, thus allowing the administration plenty of leeway to declare the “problem is remedied.” Trump recently lifted aluminum and steel tariffs against both Canada and Mexico as a way of greasing the skids for USMCA’s approval. Failure now would represent a major missed priority for the administration.