Until now, the trade wars that the USA has been fighting with various trading partners around the world have been designed to achieve trade-related aims, forcing their opponents to “level the playing field” as the Americans see it. However, this has changed with President Trumps latest use of tariffs against his southern neighbour, Mexico.
The Trump administration has said it intends to levy tariffs on all US imports from Mexico of 5% from the 10th of June with the political intension of forcing the Mexican government to stem the tide of illegal immigrants entering the USA through its land border with Mexico. The US President said that he intends to raise the tariffs incrementally “until the illegal immigration problem is remedied”.
Mexico’s senior North America diplomat, Jesus Seade said that the new tariffs would be “a disaster” and that Mexico “must respond vigorously” if they are implemented, but his boss President Lopez Obrador said that Mexico did not want “confrontation” with its northern neighbour, stating in a letter: "I propose deepening our dialogue, to look for other alternatives to the migration problem".
Trump plans to increase tariffs by 5% a month until a maximum level of 25% is attained in October which would be the ceiling. According to the President, the tariff would remain at that level: "unless and until Mexico substantially stops the illegal inflow of aliens coming through its territory. For years, Mexico has not treated us fairly - but we are now asserting our rights as a sovereign Nation," his statement said.
Trade with Mexico was worth $346.5 billion last year, making it the US’s second largest supplier of goods. Whilst Mexico is a supplier of agricultural produce to the USA, it is also a significant manufacturing hub and hosts many US owned companies. Including aerospace, technology and car manufacturing concerns. Some components make multiple crossing between the US and Mexico before a final product is ready for sale. The consequences for this have yet to be determined in the wake of the new tariffs, but a similar situation would exist in the UK, post Brexit, for car manufacture and the general view is that it would kill of UK-EU transnational car manufacture.
Trump’s announcement coincided with The White House informing the US Congress that it was seeking a new trade deal with Mexico and Canada.