UPDATE A new front opens in the tariff war

Jun 7, 2019  | 2 min  | Ep4442

Update: Late Friday, after Market to Market was recorded, plans for imposing a tariff on Mexico were put on hold. President Trump stated “Mexico has agreed to take strong measures” on migrants.  The move will suspend plans for a 5 percent tariff scheduled to begin Monday, June 10.  

 

One-fourth of North American car production takes place in Mexico. This includes several versions of pickup trucks that eventually travel the gravel roads of rural America. The looming trade war has more than just automakers wondering what the price of goods will be in the near future.

Peter Tubbs has more.

A week of negotiations between Mexico and the United States have so far failed to avoid looming tariffs.

A tariff of 5 percent on all imported goods from the nation’s second largest trading partner are scheduled to take effect on Monday. Mexico exports $418 billion worth of goods annually and the U.S. imports 80 percent of the total.

Unlike the current trade dispute with China, the proposed tariffs are in response to a political rather than economic issue. An increase in illegal immigration from Central America, with Mexico acting as a conduit, has sparked a battle between the White House and new Mexican President Andres Manuel Obrador.

The Administration is asking the Mexican government to slow the flow of immigrants across the shared border, or tariffs on all Mexican imports will be imposed.

The Mexican government has taken a conciliatory tone in its public statements.

Marcelo Ebrard, Secretary of Foreign Affairs of Mexico: "We we are optimistic because we have a good meeting with respectable, respectful position from both parts. We, we have the opportunity, we have the opportunity to share our point of view explained why the Mexican position is like that we are following in regarding this issue.”

Automobiles, trucks and their respective parts are the lion’s share of Mexico’s export volume to the United States. Supply chains have grown more complex since the signing of NAFTA in 1994, and vehicle components cross the border up to 8 times before final assembly. Multiple tariffs charged on multiple crossings would inflate the costs of autos paid by the American consumer.

The prospect of a spiraling tariff war with the nation’s largest trading partner spooked markets and drew a cool reception from Republicans in Washington.

Senator Mitch McConnell, Majority leader, Republican – Kentucky: “We are not fans of tariffs. We're still hoping that this can be avoided, at the same time, it's way past time the president's request for assistance from our government be met.” 

Senator Charles Grassley, R – Iowa : “These talks will probably come to a resolution so that tariffs aren’t needed. And so I don’t think we need to deal with what the GOP in the United States Senate says. Now I have said that I didn’t agree with what the President on these tariffs. I’m not backing off on that. I don’t think it’s the right thing to do.”

A 5 percent tariff takes effect on Monday, June 10th, and will increase by 5 percent each month until the tariff reaches 25 percent. The additional duties will end when illegal crossings at the border drop.

For Market to Market, I’m Peter Tubbs.

 

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