On May 30, President Donald Trump turned his tariff cannons to the south directing his aim at the $346.5 billion dollar worth of goods imported from Mexico. Trump’s new tariff proposal is designed to punish Mexico for not doing enough to stem the flow of Central America immigrants crossing into the United States.
I. Economic Ramifications of the Tariff
The announcement to impose a 5 percent tax on all Mexican imports caught many Washington and Mexican politicians off guard. The timing for the new tariff was especially surprising to elected officials given that Mexico and Canada were close to finalizing a new version of the North American Free Trade Agreement.
The reasoning for the tariff was problematic from the start. Following Trump’s Mexican tariff proclamation, Mick Mulvaney, the acting White House chief of staff, tried to justify the President’s tariffs by telling the New York Times that Central American migration was “impacting the [U.S.] economy negatively.”
David MacPherson, the chair of Trinity University’s Department of Economics, told NPR that the tariff on Mexican goods was actually “a textbook example of how to do self-harm. When we put a tariff on Mexican goods or Chinese goods or anybody else, we pay the tariff. The consumer pays it. Not the other country,” said MacPherson. “Everything that we consume that’s manufactured in Mexico is going to get more expensive and jobs are going to be lost.” (NPR)
Many questioned Mulvaney’s assertion that the tariff was needed because of a “slowing” American economy. For months the White House has been bragging on the booming economy, one of the best in decades. Some in the White House would argue also that unemployment is at an all time low and stocks and bonds are at an all time high, both of which delighted Wall Street and those who favored the business oriented White House.
But much has changed in the last week. Janu Chan, senior economist at St. George Bank in Sydney, Australia told Bloomberg: “It’s not a war on trade anymore, the tariffs are now being used as a weapon for a lot of different issues he (Trump) has with with various countries.” Chan added: “It’s worrying because it’s quite impactful to global economies and global growth.”
Texas and California are especially active in the automobile industry which amounts to $124 billion dollars of imported parts for automobile factories in Mexico and the United States. American factories include General Motors, Ford, and Chrysler, and Mexico manufactured two million of the nearly 18 million new cars sold in America last year.
On any given day, noted Politico, more than $452 million worth of auto parts are traded in either direction across the U.S.-Mexico border, according to Ann Wilson, senior vice president of the Motor and Equipment Manufacturers Association.
Mexico also manufactures Japanese and German automobiles and auto parts for the American market. Several years ago I visited the assembly plants in Nuevo Laredo where thousands of workers produced the Ford chassis that would be added to autos assembled in the U.S. Midwest. The Ford plant is but one of hundreds of manufacturing plants located in the twin cities of the US-Mexico border. The availability of Mexican steel and cheaper skilled labor in Mexico makes American cars competitive, especially in truck and SUV sales.
Automobile parts constitute nearly a third of the products crossing the U.S.-Mexico border into the United States. Auto experts note that some of those products cross the border as much as eight or nine times as manufactured parts are assembled in multiple processes. If a tariff is applied to goods crossing the border, it would make such assembly fiscally prohibitive.
All agree that Texas would be harmed by the tariff on Mexico. An NPR story on June 1 noted that “Residents, business owners and political leaders in Laredo, Texas are bracing for President Trump’s implementation of a 5% tariff on all goods coming from Mexico that would begin June 10th.” The Austin American reported: “The tariff would be felt nationwide, but Texas imports more from Mexico than does any other U.S. state — bringing in $107 billion of Mexican products last year — and its economy is closely linked to that of its southern neighbor.”
According to NPR, the tariff wars come at a bad time because Mexico recently “surpassed China and Canada as America’s top trading partner, which helped catapult Laredo past Los Angeles to become the number one port in the country. About $20 billion worth of goods flowed through [Laredo] during the month of March — mostly automotive parts.” Moreover, as reported by the White
House, “the tariff will gradually increase to 25% if Mexico doesn’t do more to stop the flow of illegal immigration into the U.S.” (NPR)
President Trump has been known for utilizing drama and theatrics in his public remarks and tweets. His latest tweet on this tariff issue demonstrates his lack of understanding of an important policy issue as well as his unreasonable approach to a complex problem. Trump tweeted two days after his tariff announcement, “They (Mexico) took many of our companies & jobs.” Trump insisted that Mexico had to stop “the travesty that is taking place in allowing millions of people to easily meander through their country and INVADE the U.S.” (New York Times 6-2-2019)
II. Humanitarian Crisis
The White House is determined to blame Mexico for the Central American refugee crisis. But Mexico is not responsible for the humanitarian crisis in its neighboring countries. Most immigration experts agree that putting an end to immigration from Mexico’s southern borders is a difficult and complex issue. While Mexico has stepped up its efforts to curtail immigration from Central America, the
daily number of unauthorized migrants who enter the Mexican Republic grows larger every year.
Every week thousands of refugees are abandoning their homes and livelihoods in Honduras, Guatemala, and El Salvador [known as the Northern Triangle] because of violence consuming their homeland. Amnesty International has been tracking this crisis and notes the number of unaccompanied children who are seeking refuge outside their country. The plight of these children has reached a crisis stage. Unaccompanied immigrant children are principally from the Northern Triangle, and seek to enter the United States at the US/Mexico border.
According to 2019 U.S. Border Patrol Apprehensions data, 44,779 unaccompanied children from the Northern Triangle have been apprehended thus far at the US/Mexico border. When interviewed by the Federation for American Scientists, children predominantly cited the following reasons for fleeing the region:
● violence in their community and/or home country
● avoiding recruitment into gangs
● exploitation in the form of prostitution or human trafficking
The United Nations Refugee Agency recently concluded that “Gang warfare and violence have transformed parts of Central America into some of the most dangerous places on earth.” UN reports have documented a “high rate of brutal homicides, but other human rights abuses are on the rise, including the recruitment of children into gangs, extortion and sexual violence.”
The New York Times reports that Trump “has moved to cut off all foreign aid to countries like Guatemala, Honduras and El Salvador, and he threatened to completely seal off the border with Mexico, a move that numerous officials told him would violate American law and international treaties.”
The response to increased migration is not taxation of Mexican goods, but humanitarian aid to Central America. The countries of this region need economic assistance to help create jobs, eliminate corruption, restore the judiciary, and end military interference in the political process.
A humanitarian crisis cannot be solved by one country alone. Mexico does not have the resources to prevent the influx of immigrants who traverse its southern boundaries on a daily basis. The White House, by eliminating more
than $500 million dollars of economic and humanitarian aid to Guatemala, Hondorus, and El Salvador, has made it more likely that people living in poverty, fear, and political instability in the Northern Triangle countries will move northward in search of peace, justice, and economic stability.