US-Mexicos trade war could hit Mexico economy, spur migration
If President Donald Trump makes good on threats to gut NAFTA and impose stiff tariffs on Mexican goods, economists say he risks a trade war that could lead to the very thing he is hoping to avoid – a huge surge in Mexican migration to the United States.
The result would be catastrophe for the Mexican economy. Recession. A dramatic weakening of the peso, even below the historic lows it has already set amid Trump’s bellicose rhetoric. Soaring inflation, interest rates and unemployment.
And U.S. Sen. Sherrod Brown is equally perplexed by Trump’s actions with one of our country’s closest allies.
“It’s tragic to start off his first week in office trying to start almost a trade war and dissing one of our allies,” said Brown, a Cleveland Democrat after a Friday news conference in Youngstown on a proposed $1 trillion infrastructure program.
“I don’t really understand why you would charge American consumers for [a] 20-percent border tax to build this wall,” Brown said. “We need tight immigration policies to protect our southern border, but there has not been a huge influx of people in the last few years from Mexico or Central America into the United States.”
Brown added: “You don’t start a trade war, a unilateral trade war” over requiring Mexico to pay for a border wall. “You talk to people on the other side and you make a deal. [Trump] doesn’t seem to have done that.”
A trade war with Mexico “drives down the peso and drives down opportunities for Mexicans to make a living in honest manufacturing jobs,” said Adam Posen, president of the Peterson Institute for International Economics, a Washington think tank that supports free trade. “There will be more desperate Mexicans crossing the border.”
And the U.S. would by no means be immune from the fallout.
Mexico is the United States’ third-largest trading partner for goods, and the two countries did some $583.6 billion in total cross-border commerce in 2015, according to the Office of the United States Trade Representative. That included a U.S. goods and services trade deficit of $49.2 billion.
America buys about 80 percent of Mexico’s exports, with automobiles, electrical machinery and fuels topping a long list that also includes agricultural goods such as fruit, vegetables, wine and beer.
The Trump administration’s proposal this week for a 20 percent tax on imports from Mexico to pay for the promised border wall was quickly walked back by officials as just one of multiple “options.”
Mexico could impose retaliatory tariffs and uncertainty would spook investors and businesses.