US to impose tariffs on Mexico

US President Declares 5 Percent Tariffs on Mexican Goods Starting June 10th

US President Declares 5 Percent Tariffs on Mexican Goods Starting June 10th

US President Trump has declared imminent 5 percent tariffs on Mexican goods imported to the US starting on June the 10th in response to the issue of illegal immigration.

On May 30th, 2019, President Trump announced that the US will be imposing 5 percent tariffs on goods imported from Mexico in an effort to combat the unrelenting flow of illegal immigrants across the US border with Mexico.

In a Twitter post on May 30th, President Trump said:

On June 10th, the United States will impose a 5% Tariff on all goods coming into our Country from Mexico, until such time as illegal migrants coming through Mexico, and into our Country, STOP. The Tariff will gradually increase until the Illegal Immigration problem is remedied at which time the Tariffs will be removed. Details from the White House to follow.

In a Whitehouse Statement from the President Regarding Emergency Measures to Address the Border Crisis, Washington outlines its concerns with the national threat that illegal immigration across the Southern Border is causing, as gang-related crimes are rife, and the influx of drugs and narcotics is damaging US infrastructures by overburdening hospitals, schools, and its welfare systems.

President Trump has similarly imposed tariffs on billions of dollars’ worth of goods imported from China; Mexico now faces the same treatment as the statement from the Whitehouse warns that the initial 5 percent tariffs on all Mexican imports will inevitably ascend in gradual increments unless the issue of illegal immigration is dealt with.  

‘For decades, the United States has suffered the severe and dangerous consequences of illegal immigration.  Sadly, Mexico has allowed this situation to go on for many years, growing only worse with the passage of time.  From a safety, national security, military, economic, and humanitarian standpoint, we cannot allow this grave disaster to continue.  The current state of affairs is profoundly unfair to the American taxpayer, who bears the extraordinary financial cost imposed by large-scale illegal migration.  Even worse is the terrible and preventable loss of human life.  Some of the most deadly and vicious gangs on the planet operate just across our border and terrorize innocent communities.’

‘To address the emergency at the Southern Border, I am invoking the authorities granted to me by the International Emergency Economic Powers Act.  Accordingly, starting on June 10, 2019, the United States will impose a 5 percent Tariff on all goods imported from Mexico.  If the illegal migration crisis is alleviated through effective actions taken by Mexico, to be determined in our sole discretion and judgment, the Tariffs will be removed.  If the crisis persists, however, the Tariffs will be raised to 10 percent on July 1, 2019.  Similarly, if Mexico still has not taken action to dramatically reduce or eliminate the number of illegal aliens crossing its territory into the United States, Tariffs will be increased to 15 percent on August 1, 2019, to 20 percent on September 1, 2019, and to 25 percent on October 1, 2019.  Tariffs will permanently remain at the 25 percent level unless and until Mexico substantially stops the illegal inflow of aliens coming through its territory.  Workers who come to our country through the legal admissions process, including those working on farms, ranches, and in other businesses, will be allowed easy passage.’

Click here to read the full statement from the Whitehouse.

US-Mexico border.

Andres Manuel Lopez Obrador, the President of Mexico reacted to the Trump administration’s decision to impose tariffs on Mexican imports with a letter on May 30th, in which he wrote: “With all due respect, even though you have the right to say it, ‘make America great again’ is a fallacy because, until the end of times, and beyond national borders, universal justice and fraternity should prevail.”

Washington has charged Mexico’s government with lacking any conviction and falling short when it comes to tackling the issue of illegal immigration from Mexico into the US which has become unmanaged and is straining and causing havoc on US national security and resources. The issue is not limited to illegal immigration but also the surge of asylum seekers from various countries like Honduras and El Salvador.

The Whitehouse delivered a statement on dealing with the border problems as the Trump administration has been pressing for the approval of the US- Mexico-Canada Agreement which would create a revised version of the North American Free Trade Agreement.

President Trump has justified the use of tariffs against Mexico as a national security emergency and therefore through the International Emergency Economic Powers Act will install gradually increasing levies on goods imported from Mexico.

During a meeting for the US-Mexico-Canada Agreement, Vice President Mike Pence said:

“So, I just wanted to thank you for all of your efforts in helping to bring this about. I want to thank the Prime Minister and his entire team for the way that they worked in good faith to reach this agreement.  And I’m here to pledge to you that we’re going to work closely with Canada, with our neighbors in Mexico, and we’re going to get the USMCA done this year.”

Click here to read the full remarks from the Whitehouse.gov.

What consequences could levies on Mexican imports have on the financial markets and business?

Mexico now faces a similar fate to China in terms of US tariffs.

Washington’s latest decision to impose tariffs on Mexico is fueled by the border crisis with an unregulated flow of illegal immigrants. Various nations have reported drops in their financial markets, particularly the Japanese stock markets, as car manufacturers from Japan were dealt a heavy blow by the imminent imposition of a 5 percent tariff that could begin next month, because Japan has business operations in Mexico which could damage investor sentiment and force companies to draw up contingency plans and schedule shutdowns to minimize any disruptions and increase in costs caused by the new tariffs.  

The Mexican peso fell slightly as a result of the proposed tariffs from Washington which could increase Mexico’s market competitiveness. As reported by Goldman Sachs, Mexico was the US’ second largest supplier as imports amounted to around 350 billion dollars. Mexico is a strong producer of vehicles with American companies such as Ford and General Motors that have business operations located there.

President Trump’s warning of imposing a 5 percent tariff on all Mexican goods that are imported into the US could take immediate effect on the 10th of June which would then surge to 25 percent by the beginning of October unless Mexico mitigates the immigration crisis; Mexican lawmakers have suggested the tariff threat could be devastating and that repercussions could ensue.

Phil Levy, a contributor for Forbes.com suggests:

While markets have reacted negatively to the expanding trade war with China, each move by the Trump administration seems to have been treated in isolation. How much worse is a 25% tariff than a 10% tariff? What is the economic cost if tariffs apply to $550 billion of Chinese imports versus $250 billion? What will it mean for corporate profits if a U.S.-China deal is deferred for several months?

If markets instead see presidential actions as signaling a deep-seated protectionism, of the sort that will do lasting damage to U.S. economic prospects and require a costly reworking of global supply chains, then there could be a broader, qualitative reevaluation.

Click here to read the full article.  

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