Trump's Mexico tariffs bad news for Canada's auto sector: Economist
President Donald Trump is determined to impose the 5% tariff he’s threatened against Mexican imports and sees it as a way to help fund construction of the border wall he promised during his campaign, people familiar with the matter said.
Trump plans to portray the move as making Mexico pay for the wall -- part of his signature 2016 pledge, said the person, who spoke on condition of anonymity. While Trump has repeatedly argued that the countries he penalizes bear the cost of tariffs, it’s U.S. importers that pay the duties and some of that gets passed to consumers in the form of higher prices.
The move -- prepared by a small group within the White House and tightly kept -- has stoked divisions among senior officials, two people familiar with the matter said. U.S. Trade Representative Robert Lighthizer was among those stridently against the decision over concerns it would doom the USMCA trade accord with Mexico and Canada that needs to be approved by the nations’ legislatures.
Lighthizer supports the president and what he’s doing, including in working with Congress to drum up bipartisan support to get the USMCA deal approved, said USTR spokesman Jeff Emerson in an emailed reply to a request for comment.
Trump’s announcement late Thursday was the latest expansion of his trade wars. It came just days after he removed steel tariffs on Mexico that had prompted retaliation against U.S. farm products. It brought together two key issues -- trade and immigration -- as he ramps up his campaign for re-election in 2020.
Tori Whiting, a trade economist at The Heritage Foundation, a conservative think-tank, said the tariffs are a tax on U.S. consumers on everything from avocados to car parts. The tariffs would hurt efforts to address issues at the border and further weaken the prospects of ratifying the USMCA, she said.
While the U.S. and Mexico should take action to address illegal immigration, “we can’t do that when Mexico is staring down the barrel of a tariff gun.”
The move has been met with criticism from Democrats and many Republicans. Senator Chuck Grassley, an Iowa Republican, called the plan a “misuse” of authority by Trump, adding that “trade policy and border security are separate issues.”
But Trump on Friday cast the tariffs as a way to drive manufacturing back to the U.S., saying companies will leave Mexico and relocate to the U.S. if he imposes the duties.
The decision left Mexico’s president calling to resolve the issue “with dialogue.” Mexico is by far the largest source of U.S. auto imports and tariffs on goods from there would increase costs for many major manufacturers.
Mexico’s foreign minister, Marcelo Ebrard, is headed to Washington for talks aimed at resolving the trade dispute. He said on Twitter that he would meet on Wednesday with Secretary of State Michael Pompeo, and that he had spoken with both Pompeo and Jared Kushner, a White House senior adviser and Trump’s son-in-law.
Trump has been repeatedly rebuffed by Congress to get funding to build the wall, and his administration has only secured a portion of the US$8 billion it wants. Congress has agreed to provide only US$1.4 billion for physical barriers, while the administration is aiming to use an emergency declaration to redirect US$3.5 billion in funding from military construction projects and to tap other funding sources.