Suspension of tariffs on Mexico is good news
Late last month, President Trump threatened to impose a 5 percent tariff on all goods imported to the U.S. from its biggest trading partner, Mexico, beginning June 10 and increase those tariffs by 5 percent each month to a permanent level of 25 percent in October unless Mexico satisfied him it is getting tougher on illegal immigration.
Because we joined what it appeared was almost-universal criticism of taking this step, we were pleased talks between the U.S. and Mexico prevented implementation of these tariffs.
On Friday night, President Trump said tariffs on Mexican goods were “indefinitely suspended” after negotiators reached a deal on immigration enforcement.
For all of the reasons detailed below, we hope this is something the Trump administration won’t revisit in the future.
Put aside for the moment the question of whether the tariffs would have been, as U.S. Sen. Charles Grassley, R-Iowa, said, a “misuse of presidential tariff authority” and the fact President Trump was telling Mexico it needed to manage the border better on its side when our own country’s leaders aren’t addressing illegal immigration through comprehensive immigration reform on our side, then consider the consequences of Mexico tariffs.
– American consumers would feel the pain.
“Last year, Americans imported more than $346 billion in goods from Mexico, with cars and auto parts, computer equipment, manufacturing inputs and agricultural products among the top products imported. … The 5 percent tariff represents a tax increase of approximately $17 billion on U.S. consumers and businesses. Should the tariff rate escalate to 25 percent, the tax on Americans would reach $86 billion, according to a Chamber analysis of Commerce Department data,” Thomas J. Donahue, U.S. Chamber of Commerce chief executive officer, wrote in a piece for Fox Business.
– The overall U.S. economy would suffer.
The Perryman Group, an economic analysis firm based in Texas, said tariffs, if enacted and maintained, likely would cost hundreds of thousands of American jobs.
In a report issued last week, the National Association for Business Economics said protectionist trade policy is the primary concern driving a “surge” in fear of recession by the end of 2020 among economists.
“Increased trade protectionism is considered the primary downwide risk to growth by a majority of the respondents,” Gregory Daco, chief U.S. economist for Oxford Economics, said in a statement.
– Already feeling the negative impact of the Trump administration’s trade war with China, farm states like Iowa would get hurt even more.
The U.S. exported $19 billion in agriculture products to Mexico last year, making Mexico the second-largest buyer, after Canada, of those products, according to the U.S. Department of Agriculture. Mexico is the No. 1 market for U.S. corn, rice, dairy products, poultry, and eggs, and is a major buyer of American beef, pork, soybeans and wheat.
“Producers are extremely concerned about another potential trade retaliation from Mexico,” said National Pork Producers Council President David Herring, a pork producer from North Carolina.
– Tariffs would have cast a cloud of uncertainty over the revised NAFTA trade deal, known as the U.S.-Mexico-Canada Agreement.
“We need to secure the border and address our nation’s broken immigration system, but it cannot be done on the backs of Iowa farmers,” Iowa Gov. Kim Reynolds said in a statement. “Iowans are frustrated with Washington’s inability to reform our country’s immigration system and address the crisis at the border, but I am asking the president to rethink this approach. Mexico is Iowa’s top trading partner, and placing new tariffs could undo the progress made by the negotiated USMCA trade agreement. Congress must move forward with ratification of the USMCA.”
– By hurting the economy of Mexico through tariffs, the Trump administration would run the risk of making the illegal immigration problem worse.
“A weaker economy (with slower growth and potentially rising unemployment) will serve to increase the incentives for Mexicans to attempt entering the U.S. in search of work. Or put bluntly, the number of illegal immigrants coming to the U.S. via the open Mexican border will almost certainly increase,” Simon Constable, a writer, economics commentator, and a fellow at The Johns Hopkins Institute for Applied Economics, Global Health and the Study of Business Enterprise, wrote in a piece for Forbes.
Without question, suspension of tariffs on Mexico is good news.
Sioux City Journal. June 9, 2019
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