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The Tariff Threat Against Mexico Could Be Trump's Riskiest Bet Yet

June 8, 2019 Topic: Economics Region: Americas Blog Brand: The Buzz Tags: TariffsMexicoUSMCANAFTA 2.0Donald TrumpImmigration2020

The Tariff Threat Against Mexico Could Be Trump's Riskiest Bet Yet

Could it spark a recession? Slow economic growth?

Waging a trade war against Mexico could serve as a lesson to China, Europe and Japan that even a quick deal capitulating to some of Trump's demands does not necessarily neutralize the threat of tariffs from the United States. It could very well prompt Beijing, for example, to harden its position amid its own trade negotiations with Washington — no longer able to trust Trump's promises that tariffs would be reduced long-term should China meet Washington demands.

What's the main takeaway?

While there's a chance Trump could actually implement the tariffs in full as a punishment for Mexico's failure to stem the northward flow of migrants, he may also be keeping them in reserve to spur the Mexican government to devote more forces to resolve the problem at hand.

A lot still depends on if — and to what extent — the president follows through on his threat. Trump's tariffs not only risk freezing the USMCA approval process, but plunging the United States and Mexico into recession. Though, in sending the Mexican economy into an even deeper tailspin, Trump risks making matters even worse on the U.S.-Mexico border by prompting even more desperate Mexican citizens to head north in search of work.

A Tariff Threat Against Mexico Could Be Trump's Riskiest Yet is republished with the permission of Stratfor Worldview, a geopolitical intelligence and advisory firm.

Image: Reuters