Donald Trump has made it clear that he plans to impose a 25% tariff on Mexican imports if the country does not stop the flow of migrants and drugs into the United States. This threat has sent shockwaves through the Mexican economy, with the peso plummeting to its lowest rate in two years.
Economic Implications
The impact of Trump’s tariffs could be severe for Mexico, which relies heavily on trade with the US. In 2021, Mexico overtook China as the US’s biggest trade partner, and any disruption to this relationship could have far-reaching consequences. The country’s economy is already sluggish, and a tariff-induced recession is a real possibility.
Trade Opportunities
Mexico wants to convince Trump that it can be a useful part of a regional bloc to out-compete China by working together. Officials say they will encourage companies to source more components from Mexico rather than China. However, this may be easier said than done, especially when many of those importing Chinese parts are American companies.
Security Cooperation
On security, Ms. Sheinbaum is more serious about tackling Mexico’s gangs and has a policy that includes better intelligence-gathering and information-sharing, offering opportunities for bilateral cooperation.
Mexico’s Leverage
While Mexico may not have much leverage in terms of tariffs, it can use its influence on migration to its advantage. The number of irregular migrants crossing the border with the US fell by 77% between December 2023 and August this year, largely thanks to enforcement by Mexico. Ms Sheinbaum could do as Trump wants and deploy even more soldiers to deal with migrants.
While it is unclear how much more Mexico can do to stem chaos at the border, it is clear that the country faces a tough road ahead. Trump’s presidency presents both opportunities and challenges for Mexico, and the outcome will depend on the country’s ability to navigate these complex issues effectively.
Source: The Economist
