Follow Us:

Tariff against Mexico

Mr Trump has couched his announcement with the warning that the tariff would gradually increase “until the illegal immigration problem is remedied”.

Editorial | New Delhi |

It is an economic reprisal in the absence of a wall according to the lights of Donald Trump.

Having failed to secure funds from Congress for the ambitious project along the US border with Mexico, the US President has announced tariffs for Mexico until “immigration is remedied”. Mexico isn’t Iran, let alone China. The influx across the border goes beyond the issue of immigration; it is verily a socioeconomic problem that has assumed a heartbreaking dimension of children being separated from their parents.

Yet the US President has been remarkably insensitive to the break-up of families. Rightly has Mexico’s Leftist President, Andrés Manuel López Obrador, reminded the White House that “social problems aren’t solved with taxes”. This is a fundamental of welfare economics that has been accorded the short shrift by Mr Trump, as he has done with a welter of other issues.

The US President has imposed a 5 per cent tariff on all Mexican imports from 10 June to exert pressure on the country to its south to do more to curb immigration into the US, in a surprise move that has rattled markets but is unlikely to address the fundamental issue ~ check immigration.

Mr Trump has couched his announcement with the warning that the tariff would gradually increase “until the illegal immigration problem is remedied”. The tariff will increase steadily to 25 per cent until illegal immigration across the southern border was stopped. If implemented, the measures are bound to trigger retaliation that would hit the farming and industrial states that support Trump. He made the announcement via Twitter after informing the media that he was planning “a major statement” that would be his “biggest” so far about the border.

While the US awaits the response of the Democrat Speaker of the House of Representatives, Nancy Pelosi, investors are afraid that increasing trade friction could hurt the global economy, pre-eminently the Mexican peso and the US stock index futures.

The Asian stock markets tumbled on Friday, and this included the shares of Japanese carmakers who export from Mexico to the US. In a word, the jitters of Mr Trump’s (yet another) impetutous decision are already being felt. It has raised the risk of devastating economic relations with the biggest US trading partner. Mexico, which relies heavily on cross-border trade, rose to that ranking as a result of Trump’s trade war with China.

The National Foreign Trade Council, which represents the largest US exporters, has binned the move as a “colossal blunder”. The White House is yet to comprehend, far less grasp, the magnitude of the decision that does not appear to have been sufficiently thought through. China has hit the bull’s eye in its statement expressing sympathy for Mexico ~ “The United States has repeatedly taken trade bullying action. China is not the only victim.” Donald Trump will hopefully get the trans-Pacific message. His withers may yet remain unwrung.