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Mexico Prepared to Walk From NAFTA Talks Over Tariffs

Mexico is pushing back on President Donald Trump’s proposed tariffs on goods originating south of the border.

In an interview yesterday, Mexican Economy Minister Ildefonso Guajardo said the country won’t be pressured into accepting provisions to the North American Free Trade Agreement that it doesn’t deem fair.

“The moment that they say, ‘We’re going to put a 20 percent tariff on cars,’ I get up from the table,” Guajardo told Bloomberg. “Bye-bye.”

The country’s position is partly due to what Guajardo sees as an inevitable escalation that would result if the U.S. were to make the first move.

“Opening the door to tariffs is very dangerous, because it’s like opening Pandora’s box — the lines of people asking for protectionism in Washington would reach to Maryland, and in Mexico City they’d reach to Puebla.”

And in terms of the proposed border adjustment tax, Guajardo and Trump have one thing in common: They both think it’s too complicated. He says it would require “a crazy amount” of oversight.

Should NAFTA go by the wayside, World Trade Organization agreements would still provide regulations that limit the tariffs countries can impose on one another. In the case of Mexico, the average tariff would be 3 percent, Bloomberg reports. While Mexico is not looking to dissolve NAFTA, Guajardo says the resulting tariffs would be “manageable.”  The country is also pursuing additional trade deals with Brazil and Argentina, and it’s rallying support for the Pacific Alliance, which has emerged from the shadow of the now defunct Trans Pacific Partnership.

As the negotiations move forward, Guajardo suggests language be added that covers online commerce, telecommunications and specific parts of the energy industry. He also calls for a strengthening in the requirements for the amount of North American content that goes into duty-free products.

What might Trump do?

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While this plays  out in the press, no formal negotiations on NAFTA can begin until President Trump provides Congress with 90 days notice that a new deal might be signed. Mexico, on the other hand, already started its 90-day clock earlier this month.

As it stands now, Trump has indicated that though he thinks the U.S./Canadian relationship is “outstanding,” when it comes to Mexico, he has said the U.S. has been treated unfairly. This outlook has led him to float the idea of a 20 percent tariff on all goods from Mexico. In his opinion, it would help level the playing field—and finance the his controversial border wall.

This idea of “fair trade” has been a rallying cry for Trump since his candidacy. And he reiterated his stance yesterday at a speech at the National Governors Association. “I want trade. I want great trade between countries but the word ‘free’ is very deceiving, because it’s good for them and not good for us. I want fair trade,” he said.

“And if we’re going to be taxed, they should be taxed at the same amount—the other countries. And one of two things is going to happen: We’re going to make a lot of money or the other country’s going to get rid of its tax and that’s good too,” he continued “Because now the product…will now flow into other countries where right now they can’t do it.”

Where do Americans stand?

And product flowing between our country and others is something that most Americans agree on, it seems. A recent Wall Street Journal/NBC poll found that Americans are more favorable toward free trade than they’ve been in recent months.

The survey found that 72 percent of respondents see trade as an opportunity, while only 23 percent regard it as a threat. This represents a 14-point uptick when compared to a Gallup poll from last year, and it it’s the highest percentage of Americans to ever view trade as positive.

Democrats were the largest group to embrace free trade with 57 percent saying it is more beneficial than harmful; a year ago that number was only 34 percent. On the Republican side, the change was incremental from 23 percent a year ago to 27 percent today.

Education also played a part, as whites with four-year degrees were largely in favor of free trade, while those without were much more negative.