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In UK, Trump calls Mexico tariffs 'likely'

By SCOTT REEVES in New York | China Daily Global | Updated: 2019-06-05 23:53

President Trump speaks at a joint press conference in London on Tuesday. [Photo/IC]

President Trump's threat to impose tariffs on imports from Mexico to the US starting next week unless it curbs illegal immigration across the southern border could raise the cost of burritos in the US by about 5 cents — and cars as much as $10,000.

Compared with potentially higher prices for cars, auto parts and flat-panel TVs manufactured in Mexico that a tariff would bring, a nickel increase for anyone hungry for a spicy, calorie-choked burrito made with avocado would be irrelevant.

Trump wants Mexico to admit and house those fleeing poverty and violence in Guatemala, Honduras and El Salvador, countries on Mexico's southern border, or to prevent migrants from entering Mexico to travel north to enter the US illegally through Texas, New Mexico, Arizona and California. But it's unclear what preliminary steps Mexico would have to take or how quickly it would have to act for Trump to lift the threat of tariffs.

Speaking on Tuesday at a news conference with British Prime Minister Theresa May in London, Trump said "it's more likely that tariffs go on" than not.

"Mexico shouldn't allow millions of people to try and enter our country," Trump said. "And they could stop it very quickly — and I think they will. And if they won't, we're going to put tariffs on."

A Mexican delegation led by Foreign Minister Marcelo Ebrard is scheduled to meet with US officials on Wednesday in Washington in an attempt to work out an agreement prior to the June 10 deadline set by Trump.

If a deal cannot be reached, Trump has vowed to impose a 5 percent tariff on about $360 billion in Mexican imports. The tariffs would rise 5 points each month and reach 25 percent in October, making tariffs on Mexico larger than those imposed on China in an on-going trade dispute.

Ebrard said the proposed tariffs would damage Mexico's economy and undercut his nation's current efforts to curb illegal immigration to the US.

"Tariffs could cause financial and economic instability," he told The New York Times.

Ebrard tweeted: "We will be firm and defend the dignity of Mexico." There has been no official statement, but Mexico is expected to retaliate if Trump imposes tariffs.

Trump may face a revolt by Congressional Republicans, who say the tariffs would damage the economies of both nations and needlessly throw people out of work.

That could result in a replay of Congressional opposition to building a wall along the southern border to stem illegal immigration. Last March, 12 Republican senators voted to override Trump's use of a national emergency declaration to re-appropriate billions of dollars to construct a wall along the southern border. Trump vetoed the measure.

Some Republicans see Trump's proposed tariffs on Mexico — with which the United States has a free-trade agreement — as a similar mistake and appear to be lining up in opposition.

"This is a misuse of presidential tariff authority and counter to Congressional intent," Senator Chuck Grassley, a Republican from Iowa and chairman of the Senate Finance Committee, said in a statement.

But Senator Lindsey Graham, a Republican from South Carolina, tweeted: "I support President Trump's decision to impose tariffs on Mexico until they up their game to help us with our border disaster."

House Speaker Nancy Pelosi, a Democrat from California, said: "The president's threat is not rooted in wise trade policy but has more to do with bad immigration policy on his part."

US business leaders are puzzled by Trump's action because it follows the recently announced US-Mexico-Canada Agreement and would complicate its ratification in Congress. Business leaders said tariffs would boost consumer prices and disrupt supply chains.

"Imposing tariffs on goods from Mexico is exactly the wrong move," Neil Bradley, chief policy officer for the US Chamber of Commerce, a lobbying organization in Washington, said in a statement. "Tariffs will be paid by American families and businesses without doing a thing to solve the very real problems at the border."

The Business Roundtable, an organization of CEOs from major US companies that employ about 15 million people and generate about $7 trillion a year in revenue, said US immigration law must be updated to increase the number of highly skilled immigrants while increasing the number of temporary workers as needed.

"America truly is a nation of immigrants," the group said in a statement. "It is also a nation governed by the rule of law. US immigration policy must balance these values. It must also reflect the realities of the 21st century economy."

The National Retail Federation, a trade group in Washington, said tariffs will increase consumer prices.

"The growing tariff bill paid by US businesses and consumers will raise the cost of living for American families," David French, senior vice-president of government relations, said in a statement.

The US auto industry would be hardest hit. In an analysis of the US industry's exposure to the tariff, Deutsche Bank estimated that, if the penalty rises to the full 25 percent, General Motors would take a $6.3 billion hit before interest and taxes; Fiat Chrysler's hit would be $4.8 billion and Ford Motor Co's would be $3.3 billion.

"The auto industry gets hammered," Joe Phillippi, head of Auto Trends Consulting, told CNBC.

And so would that burrito.

Jack Hartung, CFO at Chipolte, a fast-food chain specializing in Mexican-style food, said Trump's proposed tariffs on vegetables imported from Mexico, including avocados, would increase the company's operating expenses $15 million a year.

"We would consider passing on these costs through a modest price increase, such as about a nickel on a burrito, which would cover the increased cost without impacting our strong value proposition," he said in a statement.

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