Mexico will retaliate if the U.S. imposes new tariffs

Mexico will retaliate if the U.S. imposes new tariffs

Fighting to fend off punitive tariffs announced by U.S. President Donald Trump, a Mexican delegation is set to begin talks in Washington today, where it will be pushed to do more to hold back Central American migrants.

Trump threatened to impose tariffs of 5% on all Mexican goods starting on June 10, and increase the rate in coming months to 25% if Mexico does not halt migration across the Mexico-U.S. border, which has reached its peak in recent months, intensifying the dispute over migration.

Trump’s ultimatum has hurt Mexican financial assets and global stocks, but it met resistance from U.S. business leaders and lawmakers worried about the impact of targeting Mexico, one of the United States’ top trade partners.

Global equities also tumbled after Trump made the unexpected threat against Mexico, as investors feared his aggressive trade diplomacy could tip the United States and other major economies into recession.

The U.S.-Mexican talks begin on Monday with a meeting between Mexican Economy Secretary Graciela Márquez and U.S. Commerce Secretary Wilbur Ross. On Wednesday, Ebrard will meet with U.S. Secretary of State Mike Pompeo.

With just a week until the first tariffs are implemented, the Mexican delegation led by Foreign Minister Marcelo Ebrard may have a hard time convincing U.S. officials that Mexico is doing enough to stop immigration, despite hinting that the country was prepared to further tighten security measures.

On Saturday, President López Obrador hinted that his government could agree to tighten migration controls to defuse Trump’s threat, and said he expected “good results” from the talks in Washington.

During a public event, he said: “The Mexican government is a friend of the United States government. The President of Mexico wants to stay friends with President Donald Trump. But above all, we are friends of the American people.”

In words directed at the U.S. public, he added: “We want nothing and no one to break our beautiful and sacred friendship;” nevertheless, López Obrador said Mexico would not engage in a trade war, but noted that his government had a “plan” in case Trump did apply the tariffs, without providing details. He also noted that Mexico reserved the right to seek international legal arbitration to resolve the dispute.

Nevertheless, some Mexican business groups have urged the Mexican government to strike back against any Trump tariffs.

On Friday, Mexico’s top farm lobby said López Obrador should target agricultural goods from states that support Trump’s Republican Party if Trump carries out his threat.

Mexico, who sends about 80% of its exports to the United States, has opened the possibility to retaliate against the U.S. if it imposes new tariffs; the targets will likely include farm products on Trump supporting states.

On Sunday, Trump called Mexico an “abuser” of the United States and said he wanted action, not talk and extended his demands on Mexico beyond immigration, demanding it stopped an “invasion” of drug dealers and cartels.

In April, Trump took a step back from an earlier threat to completely close the U.S. border with Mexico to fight illegal immigration, under pressure from companies worried it would cause chaos for businesses and millions in losses.

Mexico’s economy, which is heavily reliant on exports to the United States, shrank in the first quarter and would suffer a lot more if Trump were to increase tariffs to 25%.

Earlier today, Economy Secretary Graciela Márquez and Foreign Minister Marcelo Ebrard held a press conference in Washington. During the conference, Graciela Márquez revealed Mexico is preparing retaliation measures in case the U.S. imposes tariffs on Mexican products but emphasized that Mexico is hoping to reach an agreement with the Trump administration.

She also mentioned that the intention is not to damage the commercial relationship between both countries:

“We don't want to use tariffs to damage the value chains, we don't want to use tariffs to affect the creation of jobs or damage investment, we want to free commerce to prevail in North America.”