The president of the United States, Donald Trump, placed the government of the central American country, Mexico, in a political-economic dilemma of dramatic proportions by threatening to impose progressive export tariffs if they cannot curb migration.
Luis Manuel Arce
The idea was to burden absolutely every Mexican product entering the United States with a 5% tariff, rising by 5% each month until reaching 25% in October, which in practice would mean tightening the noose until the Mexican economy, in tatters, falls into a recession – the final stage of an total crisis.
This also poses a very high risk to the United States and to the world in general because an economic and trade crisis, such as the one that could burst before October, would spread like an oil spill in the ocean to reach every corner of the world. This is what happened in 2007-2008 when Washington contaminated the world with junk mortgages.
Trump attempted to disperse investors’ doubts by assuring them deceitfully that Mexico is not of interest to the United States, when this country is one of its economy’s largest supports.
Of course, he is indeed right when, in the same speech, he assured that the United States is, on the other hand, of great importance for Mexicans.
Certainly, the application of these taxes would have a direct and devastating effect on the Mexican economy, inflation would vanish, and the exchange rate of the peso to the dollar would deteriorate to intolerable levels.
But a Mexican crisis would rebound forcefully onto the United States given the huge volume of interchange through trade, the tightly interwoven financial affairs and even in the production of goods.
In 2018, Mexico exported goods worth 349.6 billion dollars to the United States, a figure that represented 83% of national exports, according to statistics from the National Statistics and Geography Institute (Inegi) and the Minister of the Economy – no small change. The export sector contributes to a third of the total value of the Mexican economy.
In the first quarter of this year, Mexico contributed 14.5% of total imports to the United States, which situates it as the second largest supplier of goods to the country after China (16.6%) – not figures that can be disregarded.
Against this real panorama, what would the impact have been of Trump’s punishing tariff plan for Mexico? Firstly it would represent a cost to the United States consumer of 17 billion dollars, according to the Grupo Consultor de Mercados Agrícolas, due to the inflation of prices of Mexican products which are an unavoidable part of that country’s traditional consumption.
Among them are car parts, cars, televisions, white goods and perishable items consumed everyday like beer, avocados, mangos and tomatoes, among many other things. For Mexico, the impact on its economy and finances would have been worse, of course, beginning with its currency which would lose value in conversion and increase the price of imports including petrol and diesel.
It would also irreversibly raise the sum of the public debts and those of companies who are paid in a foreign currency.
Thank goodness then that the expected rise in GDP, in itself precarious, has decreased by no more than point two per cent or maybe less, to 1.3%.
Additionally, there has been an increase of a quarter of a per cent to the standard interest rate which now stands at 8.25%.
This is with the levying of a 5% tariff, but Trump has threatened to raise it progressively over the next five months to reach an incendiary and intolerable 25% in October. That is if the economy could resist plummeting into a crisis, as is to be expected, before this date.
President Andres Manuel Lopez Obrador immediately realised what a Machiavellian manoeuvre Trump was making and accused the United States of welding together the issues of migration and the economy by making the levying of taxes conditional on halting migration, as if the former were inextricably dependent on the latter.
In this way, the tariff became a punishment, not simply an economic or commercial matter, and put Lopez Obrador’s government in an impossible position because they were being attacked on two flanks, on two very sensitive issues for the leadership that has found great popularity within Mexico and abroad.
These issues are, firstly, the economy with the aim of buckling the Mexican government’s anti-neoliberal strategy, and, secondly, migration, where their policy is grounded in a social and humanist vision of the problem.
The Mexican leadership is deeply committed to these paths of anti-neoliberalism and humanism.
In the case of the former, in a battle against corruption and impunity which has been assumed as an ethic and moral principle of the government and as part of its economic strategy to make Mexico an emerging power.
In the case of the latter, a humanist approach to migration by way of the political and ideological connotations conferred on a human being’s attachment to his or her origins. People do not emigrate because they want to, they repeat constantly, but because they need to.
Their social welfare programmes, delivered with a large budget allocation, are many and provide cover from nursery to old age, bearing the hallmark of a deep-rooted connection to the environment.
Linking such disparate issues in a single act, as Trump has done, as if they were two faces of the same coin, was Machiavellian for he knew that Lopez Obrador could not put the country’s economic stability at risk; and as the taxes were going to be increased progressively, the damage to the country’s production and whole financial system was going to be devastating.
Trump preferred to face the danger of negative consequences that would be the fall out on the United States from imposing a blackmailing sanction, than ceding ground on a subject that already formed part of the campaign paraphernalia currently going on in the United States. Above all it would threaten his hard man image – in line with his slogan ‘America first’.
From here stems Foreign Secretary Marcelo Ebrard’s belief that it is very difficult for the White House to recognise that the only solution to the exodus is to end poverty, and this explains why Trump and his set have not even taken the trouble to analyse the causes of the migration and can only see its effects.
The situation remains complicated for the Mexican State – which managed to curb the announced import taxes – because if the United States government, Canada and the United Nations do not collaborate on creating the conditions where migration from the countries of origin might be stemmed, there will be no army or border able to contain the avalanche of desperate people who do not want to die without first trying to find a better life. (PL)