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Will the ag sector pay for Trump’s immigration policy?

By Staff | Jun 25, 2019

There are a lot of people, businesses and entities that were pretty shaken up over Donald J. Trump’s (DJT’s) plan to intimidate and essentially extort Mexico into shutting off our border to refugees coming from Central America.

The U.S. and Mexican State departments met to discuss what Mexico had to do in order to make this new tariff threat go away, allegedly coming up with a plan that Trump claims has not all been made public. I think that they will attempt to comply with some of the measures that DJT demands and appear to have done enough to temporarily appease him.

Whatever demands that they consent to will be followed by more. The Trump administration has some general demands of Mexico including that they secure their southern border with Guatemala, crack down hard on smuggling of both drugs and immigrants, and agree to become a “safe third country” which means that they are a destination for refugees instead of a transit country.

Mexico doesn’t have the resources for the latter. The Mexican economy contracted .2 percent first quarter and it is estimated that tariffs of the scale threatened by DJT would deflate the Mexican economy by another .7 percent (not counting the indirect effect).

Whether or not they have complied with yet to be specified demands that DJT claims to have won from them is to be of the “sole discretion of the U.S.” which means the dictates of DJT. In other words, what it takes to comply will be subject to the next tweet. China claims that in trade negotiations that when they agreed to demands that that generated more demands. I would expect the same thing here with immigration demands on Mexico.

These new tariffs are illegal basis the WTO and NAFTA. Mexico did not see this coming. The tariffs were imposed by DJT using the 1977 International Emergency Powers Act. That was back in the day when Jimmy Carter needed more leverage with Iran. According to the statute, the tariffs would only be imposed after consultation with Congress. The Trump administration’s idea of what constitutes consultation with Congress is not the same as that held by Congress. IA Senator Chuck Grassley says that this is a misuse of that statute and that Congress was not consulted. If that is the case, then it is Congress that should step up and quickly fashion legislation that prevents the president from engaging in this kind of misuse of tariffs.

One pundit commented that it appears that tariffs are now the tool of choice to fix anything that annoys the president. He has pushed back on Congressional power of oversight at every opportunity, mostly with help of the GOP Senate. Grassley, Ernst, and many others complain a lot about Trump policy but they do not actually do anything. They have enabled it, including the dilution of the RFS. They can overrule the president with a two-thirds majority. Where is it?

When DJT was espousing what most considered to be crazy stuff during the campaign, supporters who agreed that it was crazy stuff would cover for him claiming things like, “Oh, he will not actually do that…or that his advisors, cabinet or Congress would not let him.” How has that worked out? I always believed that he would find a way to do the crazy stuff and he has.

His best advisors have either resigned or been fired, the ones left are sycophants or enablers and Congress is terrified of challenging him. He is off his leash. He has effectively undermined Congressional oversight refusing to acknowledge Constitutional order. He has pushed executive power so that it trumps legislative and judicial branches of government. He has an attorney general who essentially believes the president is empowered to do anything. Any judicial ruling against his wishes is spun as the result of the Judge being either “a Mexican or Obama appointee” disparaging that branch of government. Rulings against his desire are never because of the law but are biased against him in his estimation and presentation. He is functioning as an autocrat and no one has effectively moderated or cancelled his worst instincts. His base loves their “das fuehrer”.

Other trading partners such as Japan and the EU are watching Trump’s use of tariff as both a trade and foreign policy weapon thinking that their time is coming up next. I think that they are right. Trump has been advising the UK to shirk their responsibility of their financial obligations to the EU ($50 bln) and just leave with a cold/hard Brexit. That would make both the UK and EU weaker and by extension he perceives that leaves the U.S. stronger. That is how “America First” works. We may be hurt but everybody else is hurt worse which creates predatory opportunities for the U.S. People tell me that they support these policies but I often wonder if they know what they really are.

With the demise of trade with China, Mexico is now the second largest trading partner as a destination of U.S. exports and the first largest trading partner in terms of ag trade. Mexico responded calmly to the threat of tariffs and will attempt to accommodate Trump’s concerns over the flood of refugees transiting Mexico to the U.S. But if Trump goes off the deep end again and tariffs are implemented, the cooperation will deteriorate replaced by frustration.

The USMCA will go off the cliff. DJT barely removed the metals tariffs on Mexico/Canada, necessary to advance the USMCA when he imposed the new tariff threat. China noted that, which makes them less likely to trust Trump will live up to any deal.

Again, just as the ag sector has paid a price for Trump trade policy it will also pay a price for Trump immigration policy.

Farmers have gotten one trade war compensation payment and are getting another. Are MFP 3.0? MFP 4.0? MFP 5.0 coming next? How many times does it take until farmers tell their Congressional representatives of both parties “that is enough?” We just can’t afford this kind of winning.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

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