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Trump Mexican tariff threat has clear penalty, vague demands

US president hasn’t specified what he wants Mexico to do to avoid the penalties.

President Donald Trump made clear that he’s prepared to impose tariffs on Mexico over a surge of migrants at the southern US border. What he didn’t specify was what he wants Mexico to do to avoid the penalties.

Nonetheless, Mexican President Andres Manuel Lopez Obrador he’s optimistic of achieving “good results” from a high-level meeting next week in Washington following Trump’s threat to levy tariffs.

AMLO, as the Mexican president is known, discussed the upcoming talks at a press conference on Saturday. And while he called the US leader his “friend,” he said seeking international arbitration is still an option.

Details of what Trump is asking of Mexico will be the centerpiece of talks next week in Washington, where Mexican Foreign Minister Marcelo Ebrard plans to meet with Secretary of State Michael Pompeo.

So far, the Trump administration has given only broad-stroke explanations. White House Press Secretary Sarah Huckabee Sanders said Friday that “one of the biggest things they can do is the repatriation of the thousands of people coming from Central America,” and “stop these massive caravans from coming through their country into ours.”

Acting Homeland Security Secretary Kevin McAleenan told reporters on Thursday that Mexico needed to “step up their security efforts on their southern border,” align better with the US on asylum seekers, and “crack down” on transnational criminal organisations operating within the country.

The lack of specifics gives the administration broad leeway to decide whether Mexico’s efforts are measuring up. For one, Ebrard will likely have to defend his government’s decision to slash spending at the agency in charge of detaining undocumented immigrants at Mexico’s southern border.

Ebrard tweeted Friday afternoon that he’d just spoken with Jared Kushner, a presidential adviser and Trump’s son-in-law, and Pompeo, who’s currently in Europe, and that he was flying to Washington to speak with American officials.

In an earlier tweet, he said that Mexico wasn’t responsible for the flow of Central American migration to the US, or for high drug consumption in that country. He called the treatment of his country “unfair” and that it “makes no economic sense to anyone.”

Read: Markets reel as new front in trade war makes a bad month worse

On Saturday, AMLO said at the Mexican port city of Veracruz that Mexico shouldn’t be used as a pawn in US political fights.

Jesus Seade, Mexico’s undersecretary of foreign relations for North America, said Thursday he had no idea that the tariff threat was coming, and that his government hadn’t been warned by the US Embassy before Trump’s tweet announcing his decision.

Trump is determined to impose the 5% tariff set to kick in on June 10, people familiar with the matter said. He sees it as a way to help pay for construction of the a wall on the border that he promised during his 2016 campaign, and to claim that Mexico paid for it, according to the people.

While Trump has repeatedly argued that the countries he penalises bear the cost of tariffs, it’s US importers that pay the duties and some of that gets passed to consumers in the form of higher prices.

The administration’s know-it-when-you-see-it definition of action by the Mexican government has left outsiders grasping to interpret the president’s intentions — and sincerity. And there’s reason to believe Trump could be deterred.

In late March, the president said he would shut down the southern border, only to abandon the threat after Mexico took modest actions to return some migrants to their home countries. And hollow threats of economic disruption date to the earliest days of the Trump administration, when then-White House press secretary Sean Spicer announced during Trump’s first Air Force One trip his intent to seek a 20% tax on Mexican imports, only to retreat hours later.

White House officials are declining to say what metrics they’d use to decide whether to proceed with the tariff — or additional increases the president has threatened at a series of checkpoints over the summer, culminating in a 25% tax on all goods by October 1.

The White House is “going to handle this on an ad hoc basis” and is judging success simply by border crossings into the US decreasing by “a significant and substantial number,” Acting Chief of Staff Mick Mulvaney told reporters.

“We did not set a specific%age, did not set a specific number,” Mulvaney said. “It’s a very fluid situation.”

US and Mexican Economies Are Intertwined: By the Numbers

Officials within the administration — including US Trade Representative Robert Lighthizer — opposed the tariff decision, worrying that it could poison the prospects of Trump’s proposed trade deal to replace Nafta in both the Mexican legislature and among Democrats in the US House who will be central to approving the pact. Lighthizer’s office said in a statement he supported the president’s move.

Trump made the decision to publicly threaten the tariffs on a day that he was traveling to Colorado with only a small cadre of lower-level aides.

Allies on Capitol Hill and in the business community have expressed concern.

A diverse group of Republican senators, including Arizona’s Martha McSally, Ohio’s Rob Portman, Iowa’s Joni Ernst, and Pennsylvania’s Pat Toomey issued statements criticizing the proposal. National Association of Manufacturers President Jay Timmons, a frequent Trump cheerleader, warned in a statement that the “proposed tariffs would have devastating consequences on manufacturers in America and on American consumers” and said he had taken his concerns to the “highest levels of the administration.”

Seade warned of a forceful response if Trump goes forward with the tariffs. That could mean retaliatory steps that would amplify the effect of the levies on US citizens, who are already likely to bear the brunt of the costs.

The big question now is how long Mexico can continue with a policy of no confrontation.

Asked about the tariffs, Seade said: “I’m not saying we’ll sit on our hands and do nothing until June 10 to see if it’s real or not, but I trust that it’s not something that will be put into action because it would be very serious. If it happens, in my opinion we need to respond in a strong way.”

Trump seemed to leave himself a little wiggle room in a tweet on Friday, saying of tariffs that “if they start rising” it could push companies to move back to the US.

Nevertheless, there’s a sense among some White House aides that he’s not bluffing.

He cast the tariffs as a way to drive manufacturing back to the US An action that he can depict as both tough on immigration and a boon to blue collar workers has a visceral appeal to the president, who sees the two themes as driving his re-election chances in 2020.

“Anybody in this country or frankly in the world that says that they’re surprised by this has been living under a rock and not paying attention,” Sanders said. “The president’s been crystal clear that we have to have to take action.”

© 2019 Bloomberg L.P

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