How they see us: Mexico prepares for trade war
Mexico is going to have to get used to living like South Korea, “with a madman in charge north of the border,” said Tomás de la Rosa in Economia Hoy.mx Although he is supposedly a successful international businessman, U.S. President Donald Trump doesn’t seem to understand the basic rules of international trade. His tweeted threats to slap tariffs on Chinese and Mexican exports to the U.S. must be empty, since doing so would violate World Trade Organization treaties and trigger an all-against-all trade war. But empty or not, these threats have a real effect on Mexican wallets. His tweets have caused the peso to slump to record lows against the dollar, leading to higher prices for consumers here. When Trump goaded Ford to scrap a planned $1.6 billion plant in Mexico and to invest in Michigan, the peso dropped a stomach-churning 3.5 percent.
Maybe the Mexican Treasury should just buy Twitter, said Jair López in Expansion.mx. That’s the solution some Mexican currency traders have come up with. The Bank of Mexico has already sold some U.S. $2 billion on the foreign exchange market fruitlessly trying to prop up the peso—only to watch the currency dive again when Trump tweeted a new attack on our nation. For about $15 billion, we could buy the social media platform outright and just turn the darn thing off.
It’s no laughing matter, said Ernesto O’Farril Santoscoy in El Financiero. Mexico has a competitive advantage over the U.S. because of our low labor costs. “But if we get high tariffs, and the aggressive fiscal system that Trump has promised, we will have serious problems attracting productive investment.” Many of Trump’s most severely protectionist proposals are likely to run into opposition in Congress, where the dominant Republicans still mostly favor free trade. But House Speaker Paul Ryan has himself proposed a way to punish Mexico, through what he calls a border-adjustment tax. That would effectively levy a tax on goods that U.S. firms import from abroad—such as car parts made in Canada or Mexico—while removing taxes on U.S.-manufactured goods exported for sale. It would, in other words, give U.S. firms a strong incentive to make and buy American.
Two can play the tariff game, said Roberto Morales in El Economista. The Mexican government is already preparing legislation that would counter Trump’s economic attack. If the U.S. passes a border tax, said Economy Secretary Ildefonso Guajardo Villarreal, “we will change our own tax policy to neutralize it.” That could mean passing a border tax of our own, or otherwise giving special breaks to Mexican manufacturers. Apart from government action, Mexican firms have their own ways to retaliate. Two major companies, construction giant Coconal and ecotourism firm Experiencias Xcaret, have already announced they will no longer purchase Ford vehicles. If Trump insists on a trade war, Mexico will be ready to do battle.