The diplomatic war between Mexico City and Mar-a-Lago is escalating. Mexico has reacted with outrage to Trump’s threats to impose tariffs of 25 per cent on all imports to the US. This would mean the collapse of the free trade system in North America created 30 years ago.
And US trade with Mexico is a whopping $850 billion a year. 88% of all pickup trucks, so popular among American drivers, are made in Mexico. The introduction of 25% tariffs will lead to an immediate inflationary shock in many markets in the US.
400,000 jobs in the U.S. auto industry and related industries would be affected and could simply disappear. For Trump, the threat of tariffs is leverage in negotiations, but in Mexico it is now seen more as a bluff that will not be realised.
Trump is demanding Mexico’s support in resolving the migration crisis – there may indeed be progress here. But it will be hard to find consensus on other issues. The Mexican authorities already have a chilly relationship with the US. They ban imports of American GMO grain, trade around sanctions with Cuba, and limit the amount of water supplied to U.S. farmers.
Biden’s team has been very active in accusing Mexico of deviating from democracy and trying to sway the situation there through NGOs. But even under Trump, the contradictions will worsen, especially as Mexico drifts towards co-operation with China. The prospect of a war against the cartels could turn the southern border of the United States into a real war zone.
