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Trump’s tariff threat to Mexico may upend trade deal, undermine the economy
By David J. Lynch and
Kevin Sieff
May 30 at 10:51 PM


President Trump’s surprise announcement of an escalating series of new tariffs on all goods imported from Mexico is likely to upend hopes for early congressional action on his proposed North American trade deal and trigger economic upheaval on both sides of the border, according to trade analysts and business executives.

Business leaders reacted with dismay to Trump’s statement Thursday that he would impose a new 5 percent tariff on all goods from Mexico beginning June 10 to force the Mexican government to take more aggressive actions to prevent Central American migrants from crossing its territory en route to the United States.

And a prominent member of the president’s party, Senate Finance Committee Chairman Charles E. Grassley of Iowa, blasted Trump’s move as “a misuse of presidential tariff authority and contrary to congressional intent.” Implementing the tariffs, he said, would “seriously jeopardize passage” of the United States-Mexico-Canada Agreement (USMCA).
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Even by the standards of an unpredictable presidency, the announcement drew startled reactions from those involved in cross-border commerce.

Less than two weeks ago, the president agreed to lift 25 percent tariffs on steel and aluminum imports from Mexico, a move aimed at speeding ratification of the new trade deal by Congress. Senior Republicans, including Grassley, insisted on scrapping the levies before they would vote on the new deal.

Farmers in states such as Iowa had been among those hardest hit by Mexico’s retaliatory tariffs imposed to counter Trump’s metals fees.

The president’s new tariff increases would “essentially blow up USMCA,” said Rufus Yerxa, president of the National Foreign Trade Council. “The economic impact will be devastating on both sides of the border.”

Hardest hit would be Detroit’s automakers, which have spread their supply chains across North America since NAFTA.

Two-thirds of U.S. imports from Mexico are intracompany trade, parts that an American company uses to produce another product, according to Torsten Slok, chief economist at Deutsche Bank Securities.

“Trade with Mexico is basically all about the supply chain, which essentially is all about cars,” Slok said.

At a news conference, Mexico’s deputy foreign minister for North America, Jesús Seade, said the suggested tariffs would be “disastrous” and promised that Mexico would respond “strongly.”

He called the announcement an “ice bath” for U.S.-Mexico relations but did not detail how Mexico might retaliate. Last year, Mexico responded to U.S. steel and aluminum tariffs with a set of retaliatory tariffs on products including pork, potatoes and whiskey.

more at washingtonpost.com