By on March 22, 2017

U.S. Mexico Border

Now that Mexican negotiators aren’t reacting specifically to President Trump’s heated rhetoric over foreign trade policies, their terror and rage has begun to subside. The North American Free Trade Agreement might even continue to exist for the time being.

Trump’s previous attacks on NAFTA, import tariff threats, and promise of a border wall incensed Mexican officials to a point where many suggested Mexico should simply abandon the renegotiation talks on principle. However, now that cabinet officials will be speaking on behalf of the president and the focus of the negotiators have shifted toward the fundamentals — and not the politics — Mexico can relax a little. 

Despite some initial arm-folding and anger over immigration and border policing, Mexican Foreign Minister Luis Videgaray has remained engaged with the White House throughout the hostilities. The same cannot be said for Mexico’s Economy Minister and chief trade negotiator Ildefonso Guajardo. He has repeatedly said that he would immediately withdraw from talks if the United States made any attempt to add tariffs.

Recently, Guajardo has taken a more optimistic approach to the possibility of a modestly tweaked trilateral deal — even if the changes did favor North America somewhat.

However, it’s not just Mexico that’s softening its tone and making the situation appear less dire. Automotive News has cited market analysts noting a marked change in the U.S. trade prose over the last couple of weeks, especially now that cabinet officials such as Commerce Secretary Wilbur Ross are doing the talking instead of Trump.

“We find the change in tone between Ross’ comments and Trump’s campaign rhetoric striking,” said Benito Berber, senior Latin American strategist at Nomura Securities.

According to Berber, Ross seems more focused on improving NAFTA by tightening rules of origin and adding chapters on trade that favors the U.S. — especially in regard to tech, services, and energy. He also hasn’t mentioned taxing Mexico on imported items or a complete overhaul of the treaty.

For now, Mexican manufacturing is humming along and automotive industry leaders aren’t yet taking their current investments elsewhere. Future business is a different story, though. Numerous factories planned for Mexico have been cancelled and there is even more business waiting just out of frame to see how this NAFTA business goes down. The Trump administration can also decide to fiercely support Paul Ryan and his border tax adjustment proposals whenever it wants.

Still, it’s nice to have a break.

[Image: Jrsnchzhrs/Flickr (CC BY-ND 2.0)]

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11 Comments on “NAFTA Abolishment Looms Less Large as Trade Posturing Subsides Between U.S. and Mexico...”

  • avatar

    Good. I really don’t want a 20 percent or 35 percent “border tax”.

    • 0 avatar

      The prices you pay for goods and services are already based on a 35% worldwide tax, which also has the effect of driving base erosion. Eliminating worldwide taxation, reducing rates, and instituting the border tax would keep the tax burden even for any particular company, but would tend to expand the base.

      I’m not in favor of it, because it carries some risk and is only necessary to allow for full expensing of capital expenditures, which I think is overrated as a means of promoting growth. But the proposal wouldn’t have much net impact on consumers.

  • avatar

    Well, of course there’s no heat about this coming from the White House now…they’re too busy dealing with the whole “repeal Obamacare” thing and whatever fresh BS the president is tweeting about these days.

    • 0 avatar

      @FreedMike – anyone in power who actually understands trade knows that the NAFTA zone countries are extremely intertwined. TwitterPOTUS and his posturing amounts to a bunch of red meat being tossed to his rabid fan base.

      • 0 avatar

        The “posturing” was old fashioned campaign hyperbole. Funny referring to Donald Trump’s “base”. Most people probably voted more against Hillary than FOR him, even Republicans. He just hit a nerve among several large groups of voters, including some that traditionally voted Democrat.

        Most of them couldn’t put a finger on any specific issue, other than unease over the direction of the country, but Trump got their vote with general proposals (unlikely to be enacted) in areas professional politicians wouldn’t touch. I think most who voted for him knew most of it was un-doable politically, but it contrasted entertainingly with Hillary’s canned positions.

        Where many Democrats and more than a few Republicans go wrong is that they actually believe their own campaign propaganda. The die-down of the Mexican issue is proof that it WAS propaganda, except to the True Believers on both sides. They’re the last ones to realize politics and elections is a stylized game of possibilities, not a final death match.

        • 0 avatar
          George B

          Lorenzo, I believe that a significant number of Donald Trump supporters wanted to send a big loud “F— YOU!!!” message. A big part of Trump’s appeal is how much he p!sses off the other side. The iconic picture of the 2016 election was the coal miners flipping off Hillary Clinton’s van. However, there aren’t too many Trump cabinet members that would be out of place in a Mike Pence administration.

  • avatar

    One word for the recent cooling of anti-NAFTA rhetoric: Texas. Fake Prez probably just wised up to the HUUGE trade surplus Tejas enjoys with Mexico, much to Lone Star republicans delight…”don’t mess with Texas”; indeed.

  • avatar

    Point of order for the fourth paragraph: Mexico is part of North America.

    Unless your point is that free trade benefits all of North America generally, in which case this is probably correct.

    • 0 avatar

      In the business world, Mexico is a separate market, outside of “North America”, or USA/Canada, which are basically one and the same, regulations-wise.

      Selling your products or services in Mexico is a whole other ballgame for most US/Canada based or global corporations.

      Some Markets (like Europe) consider Mexico part of “Central America”, which doesn’t really exist as a continent or otherwise.

  • avatar

    This is quite brilliant move by Trump. Getting concessions, better trade conditions for the U.S. Current administrations trade/migration policies will also benefit Mexico, other Latin American countries by promoting better, fair trade, allowing to develop their economies, keeping their best and brightest home.

    This is what real leadership is! Get used to it.

    • 0 avatar

      Even if used tongue in cheek, I beg of thee to never use words “brilliant” or “leadership” when talking about Trump. Agent Orange is going to be lucky to just finish out his term…

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