How Seriously Should We Take Trump’s Mexican Auto Tariff Threat?

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On Thursday, President Donald Trump threatened to impose tariffs on cars entering the United States from Mexico if the nation doesn’t assist Washington in dealing with the migrant situation at its southern border. It’s a rather bold ultimatum, coming hot on the heels of claims that the White House was seriously considering closing the border entirely if Mexico could not curtail the flow of illegal immigrants and drugs heading north.

It’s an interesting situation, especially considering both outcomes would upend the automotive industry. But Trump argues that the growing reliance on Mexican manufacturing and proliferation of illegal immigrants has already hurt the United States badly. A contentious stance, for sure, but these are issues in need of thorough discussion. Gallup polls repeatedly peg immigration as one of the issues voters care most about — along with healthcare and the economy.

However, we only care about those things tangentially. It’s all about the cars for us. 

The still-struggling United States-Mexico-Canada Agreement (USMCA) remains unratified, with U.S. House Speaker Nancy Pelosi saying additional changes must be made. Canada, however, is very hesitant to reopen trade talks.

“When it comes to the issue of actually opening up the agreement, that’s where Canada’s view is, we’ve done our deal,” Canadian Foreign Minister Chrystia Freeland told reporters on Thursday. “This was a very intense negotiation. A lot of time, a lot of effort went into it, compromises were made on all sides, and we believe that people need to be very careful around opening up what could really be a Pandora’s box.”

As relations with Mexico have gotten better, it seems counterproductive for the president to start torpedoing his own trade agreement. Yet his words regarding the border are pretty black and white. “A lot of good things are happening with Mexico,” Trump told the media. “Mexico understands that we’re going to close the border, or I’m going to tariff the cars.”

It’s the latest in a series of car tariff threats; for the most part, they’ve been used as an economic bargaining chip. While this appears to be in the same vein, it also represents some backsliding against his earlier claims.

Initially, the president planned to close the border immediately, without any mention of automotive tariffs. But taxing imported vehicles has been a reoccurring theme during his tenure as commander-in-chief — making his latest threat to Mexico equal parts surprising and not. And that also makes it difficult to know how seriously to take him, despite assurances that he is “not kidding around.”

“I will do it,” he said. “I don’t play games.”

Automotive News reports that Mexican exporters are already considering sending their product into the United States via air freight to avoid a five-mile line of trucks at the border (caused by the Trump administration moving federal agents away from routine customs checks in order to help tackle illegal immigration). Air freight is much more expensive than shipping by ground and is typically only used by suppliers who need to get parts to a needy factory under dire circumstances.

Mexico’s ambassador to the United States, Martha Bárcena, said her country will cooperate with the Trump administration to address the core causes of migration, but added that it would be impossible to halt it entirely. “Migration will never be stopped,” she said. “It is intrinsic to humanity. But what we can do is to do it in a regular way, in an orderly way that protects human rights.”

Trump has said he would still close the border if Mexico doesn’t help curtail large migrant caravans en route to the U.S., though agreed to give the country a year to think about it. No such timeline was available for the tariff threat. However, both solutions would have a huge impact on trade. The U.S. Chamber of Commerce estimates the U.S. and Mexico trade about $1.7 billion in goods daily — and the largest chunk of that belongs to automobiles and their components.

“The whole ballgame is cars,” Trump said. “It’s the big ballgame with many countries.”

[Image: Chess Ocampo/Shutterstock]

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