Trump’s Mexico tantrum raises specter of trade war

Less than a week into the job, President Donald Trump on Thursday raised the specter of a trade war with America’s third-largest partner, Mexico, as the White House warned that the United States could impose a 20 percent tariff on Mexican imports.

This absurd threat, issued as a proposal to cover the cost of a border wall, came just hours after President Enrique Peña Nieto of Mexico canceled a visit to the United States. The visit was supposed to improve the relationship between the two countries, deeply strained by Trump’s relentless scapegoating of Mexicans during his presidential campaign. But Peña Nieto decided he’d heard enough after Trump issued executive orders Wednesday to begin rounding up unauthorized immigrants and building his border wall.

The tariff tantrum was the latest in a head-spinning torrent of lies, dangerous policy ideas and threats from the White House since Trump was sworn in last Friday. They have underscored just how impulsive and apparently ignorant the new occupant of the Oval Office is of international economic and security relationships that serve U.S. interests. His advisers appear unwilling to rein in his impulses or, as in the case of the tariff, hapless as they struggle to tamp them down.

Allowing this view to drive trade and foreign policy toward Mexico could have disastrous consequences for workers and consumers in both countries, given how tightly intertwined the two economies have become since the North American Free Trade Agreement went into effect in 1994.

NAFTA eliminated most tariffs and other trade barriers among Canada, Mexico and the United States, creating a continent-size market. The agreement led to production chains for cars, planes and other items that straddle borders and provide millions of jobs. Work that requires cheaper labor typically occurs in Mexico, where earnings are lower, while design, engineering and advanced manufacturing tends to take place in Canada and the United States.

Imposing a tariff on Mexico would mean pulling out of NAFTA, a move that would severely disrupt the flow of parts and goods across North America and stall production in factories in the United States and Canada. It also could lead to shortages of fresh vegetables and fruits in U.S. grocery stores and drive up the cost of many other consumer goods from Mexico. Mexico’s economy, which is hugely dependent on U.S. trade, would be devastated. But U.S. businesses and workers would stand to suffer immediate harm as well. Mexico would retaliate with tariffs of its own.

Trump has pointed to America’s trade deficit with Mexico as a sign that the United States is being swindled. Trade with Mexico — imports to the United States totaled $296 billion in 2015 — benefits America by lowering the cost and increasing the availability of goods, like avocados and mangoes in winter. While the trade deficit with Mexico has resulted in job losses in some industries (possibly about 700,000 jobs in the first 16 years), a 2014 study estimates that 1.9 million U.S. jobs depend on exports to Mexico. And trade, by raising wages and the standard of living in Mexico, is a big reason that illegal immigration from Mexico has dropped steadily over the years.

Sending the Mexican economy into a tailspin is the surest way to reverse that trend. Besides, a tax on Mexican imports would be paid by U.S. consumers and businesses that buy those goods. Americans would pay for the wall, not Mexicans.

This story was originally published January 27, 2017 at 3:48 PM with the headline "Trump’s Mexico tantrum raises specter of trade war."