The More Trump Insists His Mexico Tariff Threat Is Not A Bluff, The More Convinced We Are That It Is…
Or at least it should be…
Update: Trump called off the tariffs before they went into effect.
To recap: President says he’ll slap 5% tariff on all goods coming from Mexico this coming Monday if the government there doesn’t block Central American migrants from reaching the U.S. border.And the President pledges those tariffs will go up every month from there, up to 25%. The announcement made in a statement from the President that begins:
“As everyone knows, the United States of America has been invaded by hundreds of thousands of people…”
Many Republicans even don’t like the idea of new tariffs, and also the expansion of tariffs as a weapon the President will wield for all kinds of things, not just having to do with economy and trade. Oklahoma Republican Senator James Lankford describing it, according to Politico, as such:
[The administration] “is trying to use tariffs to solve every problem but HIV and climate change.”
If there’s enough opposition in the Senate, they could vote to block it. But then the President could just declare it’s a national emergency as he seems to really, really like to do, and so whatever… What they’d really have to do is pass legislation to limit the President’s power over trade, even in emergency situations, and that’d be a far harder bill to pass, plus Trump would veto it, so they’d need to have the votes to override going in.
And listen carefully to Senate Majority Leader Mitch McConnell when he says:
“There is not much support in my conference for tariffs, that’s for sure”.
Because he omits a key variable: how that sentiment about what the President should or should not do balances against supporting the President regardless of what he ultimately decides to do.
And the President says they’d be fools if they go ahead and block him. Citing his stellar approval rating among Republican voters. Here’s him boasting about that in a clip from a joint news conference in London with still-British Prime Minister Theresa May:
So here’s what we think is actually going to happen, and it’s something we can rip right out of Trump’s playbook, because he’s done it before: sometime between now and next Monday the President will moderate or modify his position, or even back way the hell off, then say he accomplished what he set out to do all along, and it’s fake news if anyone says he didn’t.
How can we predict that’s what’s gonna happen with such certainty? We can’t.
Trump sometimes likes to do unpopular things just to drive people crazy. What we’ve called the “what are you going to do about it?” approach. And he often responds to people telling him he can’t do something by saying “just watch me”. He also truly seems to be in love with tariffs. He’s consistently argued that the strong economy in the U.S. makes it a great time to do trade wars, regardless of the objective, because U.S. consumers can afford to take a little hit now they’ve got money to carry them along, and it’ll be better for them in the long term. (And he’s kind of right about that part of it: the U.S. probably could withstand a 5% tariff on Mexican goods for a little while).
Still, we think he really can’t do these Mexico tariffs for several reasons:
- Mexico ain’t China (Part I). Even though Trump recently hiked tariffs on China because they didn’t capitulate to his demands like he thought they would, those tariffs are still very targeted; designed to have maximum impact on Chinese companies, while largely sparing (for now) big U.S. companies that manufacture a lot in China, like Apple. But the Mexico tariffs he’s talking about are across the board, so they’d amount to putting a tax on all U.S. consumption of Mexican goods. That could disrupt the recently negotiated update to NAFTA, the USMCA, which has not yet been ratified by anyone.
- Mexico ain’t China (Part II). Mexico, not China is actually the U.S.’ biggest trading partner this year so far (based on numbers from the Census Department). The reason China’s portrayed as so much more nefarious generally is that the U.S. has a huge trade deficit with China; a much smaller deficit with Mexico. Which means a lot more U.S. product is exported to Mexico than to China. Which means Trump is shooting U.S. companies in the foot even more if he puts Mexico in the position of retaliating for his tariffs. And farmers. This would be a real double-whammy for them. According to Successful Farming magazine, Mexico is the U.S.’ #1 market for corn exports, and accounts for about 1/6th of all agriculture trade. And we all know how Trump is so ultra-sensitive about offending his base even a little bit.
- Mexico ain’t China (Part III). And this is probably the biggest reason we don’t think Trump can afford to put his tariff plan into action: most non-agricultural, alcohol or food imports from Mexico are what’s called “intermediate” goods or parts, according to the Washington Post. That means parts and components that are used by U.S. manufacturers to make other finished products. Trump’s glib solution: just make those parts in the U.S. instead. But that can’t happen by Monday, or a month from now, or maybe not even in a year. So what it would do is freeze big chunks of U.S. industry up as the tariffs escalate, and cost just the jobs Trump’s been bragging he’s created or saved.