President Trump Abandons Plans to Impose 5% Tariffs on Mexico as a Deal Is Struck
US President Trump called off the scheduled 5 percent tariffs on all imports from Mexico, set for the 10th of June after the two neighboring countries reached a deal in which Mexico pledged to ramp up its efforts to combat the growing migration crisis. President Trump went to Twitter to announce the decision but criticized the way the US media had covered the news. Steven Mnuchin, US Secretary of the Treasury emphasized that the Trump administration reserved the right to institute tariffs in the event that Mexico does not deliver on its side of the agreement. In an interview with Reuters, Mr. Mnuchin said: “we now have an agreement that we believe is going to fix the immigration issue. And that was extremely important to the president. Our expectation is that Mexico will do what they’ve committed to do and our expectation is that we won’t need to put tariffs in place, but obviously if that’s not the case, the president retains that authority.”
“I am pleased to inform you that The United States of America has reached a signed agreement with Mexico. The Tariffs scheduled to be implemented by the U.S. on Monday, against Mexico, are hereby indefinitely suspended. Mexico, in turn, has agreed to take strong measures to stem the tide of Migration through Mexico, and to our Southern Border. This is being done to greatly reduce, or eliminate, Illegal Immigration coming from Mexico and into the United States. Details of the agreement will be released shortly by the State Department. Thank you! The Failing New York Times story on Mexico and Illegal Immigration through our Southern Border has now been proven shockingly false and untrue, bad reporting, and the paper is embarrassed by it. The only problem is that they knew it was Fake News before it went out. Corrupt Media!”
Taken from President Trump’s Twitter account.
President Trump issued a warning to Mexico that it would introduce 5 percent tariffs, which had been scheduled for June 10th, in an effort to incentivize Mexico into taking immediate action against the flow of illegal immigration from Central America. Nevertheless, on Friday 7th of June President Trump announced that an agreement between the US and Mexico had been reached and that the planned tariffs had therefore been cancelled.
Both nations had confirmed that Mexico would boost border enforcement, which includes returning Mexican asylum seekers in the US back to Mexico until each court ruling is decided. Another aspect of the agreement includes controlling the influx of migrants en route to the US by sending more military personnel to the southern border and by increasing efforts to deal with human trafficking and drug smuggling.
“I would like to thank the President of Mexico, Andres Manuel Lopez Obrador, and his foreign minister, Marcelo Ebrard, together with all of the many representatives of both the United States and Mexico, for working so long and hard to get our agreement on immigration completed!” tweeted President Trump on the 8th of June.
On June 7th Washington published a US-Mexico joint declaration which briefly outlines the commitments of both countries as they acknowledge the severity of the migration crisis and the threat it poses to national security and humanitarian conditions.
What does the declaration outline in terms of US-Mexican commitments?
- Increased border enforcement by Mexico
Under the agreement, Mexico will be obliged to increase its border enforcement to control the migration crisis which involves increased National Guard stationing across Mexico and the southern border. Mexico will also address the key issues of human trafficking and drug smuggling, as well as illegal financial networks. Furthermore, the mutual collaboration between the US and Mexico will be strengthened when it comes to sharing criminal information and that joint efforts are made to secure and improve the way the border functions.
- Protection Protocols for Migrants
What does this mean for the US? Basically, it means that the US will use the Migrant Protection Protocol to encompass the whole southern border, which involves sending asylum seekers that pass the US southern border, back to Mexico until their adjudications are confirmed.
What does this mean for Mexico? Mexico will need to accept all migrants that are sent back whilst they wait for the results of the adjudication of their asylum claims, as well as offering basic humanitarian aid such as healthcare.
- Additional elements of the joint agreement and future strategies
In the event that the proposed actions do not yield the expected results, the US and Mexico will engage in further discussion regarding strategies and methods of tackling the security concerns and migration crisis, but moreover, the talks will address the best ways of improving the strength, efficiency and functionality of the southern border.
‘The United States and Mexico reiterate their previous statement of December 18, 2018, that both countries recognize the strong links between promoting development and economic growth in southern Mexico and the success of promoting prosperity, good governance and security in Central America. The United States and Mexico welcome the Comprehensive Development Plan launched by the Government of Mexico in concert with the Governments of El Salvador, Guatemala and Honduras to promote these goals. The United States and Mexico will lead in working with regional and international partners to build a more prosperous and secure Central America to address the underlying causes of migration, so that citizens of the region can build better lives for themselves and their families at home.’
Click here to read the full declaration from the US Department of State.
Many economists from both sides of the negotiating table argued the case that an imposition of 5 percent tariffs on all Mexican imports would have serious implications on the overall health of the Mexican and US economy. Essentially the tariffs could have sent the Mexican economy into a recession which could have worsened the migration crisis as more people would be on the job hunt. On the other hand, some people have suggested that the US-Mexico border talks were productive in raising awareness and attempting to deal with the growing issue of migration and the criminal activities that exist and thrive as they take advantage of the vulnerable and desperate migrants trying to cross the southern border in search of a better life.
The proposal and initiative to deploy Mexican national guard troops to the southern border could have been the catalyst for President Trump to cancel the tariffs but should the migration issue fail to be resolved then we could witness future threats from Washington to impose tariffs as an incentive to get Mexico to find alternative ways of dealing with the issues at the borders.
On May 30th, US border patrol personnel arrested the largest group of illegal immigrants ever recorded, after 1,036 people illegally got through the Texas border. Robert Perez, Deputy Commissioner for the US Customs and Border Protection said: “The apprehension of 1,036 individuals in a single group – the largest group ever encountered by Border Patrol agents – demonstrates the severity of the border security and humanitarian crisis at our Southwest border. The dedicated men and women of CBP, and in particular the U.S Border Patrol, are doing their very best every day to address the influx of family units and unaccompanied children.”
Taken from a national media release from the Official US Department of Homeland Security website.
A team of Mexican delegates and US lawmakers had a 3-day discussion in Washington as they tried to find common ground. As of 2018 the US imported 371.9 billion dollars’ worth of Mexican goods, with vehicles and auto parts taking the number one spot.
According to the Office of the United States Trade Representative:
‘Mexico is currently our 3rd largest goods trading partner with $611.5 billion in total (two way) goods trade during 2018. Goods exports totaled $265.0 billion; goods imports totaled $346.5 billion. The U.S. goods trade deficit with Mexico was $81.5 billion in 2018.’
- ‘U.S. goods imports from Mexico totaled $346.5 billion in 2018, up 10.3% ($32.3 billion) from 2017, and up 60.5% from 2008. U.S. imports from Mexico are up 768% from 1993 (pre-NAFTA). U.S. imports from Mexico account for 13.6% of overall U.S. imports in 2018.’
- ‘The top import categories (2-digit HS) in 2018 were: vehicles ($93 billion), electrical machinery ($64 billion), machinery ($63 billion), mineral fuels ($16 billion), and optical and medical instruments ($15 billion).’
- ‘U.S. total imports of agricultural products from Mexico totaled $26 billion in 2018, our largest supplier of agricultural imports. Leading categories include: fresh vegetables ($5.9 billion), other fresh fruit ($5.8 billion), wine and beer ($3.6 billion), snack foods ($2.2 billion), and processed fruit & vegetables ($1.7 billion).’
- ‘U.S. imports of services from Mexico were an estimated $25.3 billion in 2018, 0.6% ($164 million) less than 2017, but 59.3% greater than 2008 levels. It was up roughly 241% from 1993 (pre-NAFTA). Leading services imports from Mexico to the U.S. were in the travel, transport, and technical and other services sectors.’
To read the full report by the United States click here.
Risk Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79.28% of retail investor accounts lose money when trading CFDs with this provider. The information contained in this market review should not be construed in any way, as containing investment advice and/or a suggestion and/or solicitation for any trading activity and financial transaction. The data contained in this market review is not necessarily real-time nor accurate. The data and prices on the material are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. There is no guarantee and/or prediction of future performance. EuropeFX, its affiliates, agents, directors or employees do not guarantee the accuracy and validity of any information or data made available and assume no liability as to any loss arising from any investment based on the same. Trading Forex/CFD’s carries a high level of risk and can result in the loss of your whole investment. Forex/CFD’s are leveraged products and therefore Forex/CFD’s trading may not be appropriate for all investors. It is recommended that you do not invest more money than you can afford to lose to avoid significant financial problems in the case of losses. Please make sure you define the maximum risk acceptable for yourself.