Mexico Fights Back Over Border Wall

Mexico Trade War The Channel Group

Mexico this week has seemingly had enough of the consistent attacks from the new President of the United States and has hit back against the rhetoric of the new Trump Administration, threatening a trade war with the United States.

President Trump is expected to sign an executive order as soon as Monday signalling his intention to renegotiate the North American Free Trade Agreement (NAFTA), the free trade agreement between Canada, Mexico and the United States.

Trump’s opposition to NATFA in part comes from the agreement’s US signatory, Bill Clinton, and he claims that it is responsible for ‘destroying American jobs, but has often failed to mention that the agreement was initiated by George H.W Bush. The agreement has significantly increased US exports to both Canada and Mexico, the US’s two largest trading partners.

The problem for Trump is that a renegotiation will potentially be more damaging for US jobs, especially in some of the states that supported him in November. The top five states for exporting to Mexico are: Michigan, Texas, North Dakota, Kentucky and Indiana, all of whom voted for President Trump at the election and all of whom could lose out significantly if barriers to trade are erected against Mexico.

In fact, withdrawing from NAFTA would cost the U.S. auto manufacturing sector alone an estimated 31,000 jobs, according to the Center for Automotive Research.

It remains to be seen whether President Trump’s administration can negotiate more favourable terms with trade partners, but if he fails, this could be catastrophic for the voters he claims to be supporting.

In addition to this, President Trump’s plans for a border wall and the insistence that Mexico will pay for it, through the imposition of tariffs on imports, has left a bitter taste south of the border.

Mexico’s foreign minister Luis Videgaray said that his country would respond to any tax levied by the US in kind and that they would target the regions most reliant on exports south of the border, such as Iowa, Texas and Wisconsin.

Mr Videgaray said: “Without a doubt, we have that possibility and what we cannot do is remain with our arms crossed. “The Mexican government would have to respond.” He continued that “Mexico believes in free trade” and that barriers to trade were “not our preference” but would be willing to use them if necessary to protect the Mexican economy.

Donald Trump must very quickly learn that now he is the President, small sound bites and comments made have a drastic impact on foreign relations. A trade war would not only be damaging for Mexico, but also for the United States and the industries so reliant on trade across the US southern border.

Toby Illingworth

Toby Illingworth

Partner at The Channel Group
Toby is a Partner of The Channel Group. In addition to his work at The Channel Group, Toby is also the Executive Director of New City Initiative, a think tank representing SME asset and wealth management firms in London and across Europe.
Toby Illingworth

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