By on April 4, 2019

On Thursday, President Donald Trump threatened to impose tariffs on cars entering the United States from Mexico if the nation doesn’t assist Washington in dealing with the migrant situation at its southern border. It’s a rather bold ultimatum, coming hot on the heels of claims that the White House was seriously considering closing the border entirely if Mexico could not curtail the flow of illegal immigrants and drugs heading north.

It’s an interesting situation, especially considering both outcomes would upend the automotive industry. But Trump argues that the growing reliance on Mexican manufacturing and proliferation of illegal immigrants has already hurt the United States badly. A contentious stance, for sure, but these are issues in need of thorough discussion. Gallup polls repeatedly peg immigration as one of the issues voters care most about — along with healthcare and the economy.

However, we only care about those things tangentially. It’s all about the cars for us. 

The still-struggling United States-Mexico-Canada Agreement (USMCA) remains unratified, with U.S. House Speaker Nancy Pelosi saying additional changes must be made. Canada, however, is very hesitant to reopen trade talks.

“When it comes to the issue of actually opening up the agreement, that’s where Canada’s view is, we’ve done our deal,” Canadian Foreign Minister Chrystia Freeland told reporters on Thursday. “This was a very intense negotiation. A lot of time, a lot of effort went into it, compromises were made on all sides, and we believe that people need to be very careful around opening up what could really be a Pandora’s box.”

As relations with Mexico have gotten better, it seems counterproductive for the president to start torpedoing his own trade agreement. Yet his words regarding the border are pretty black and white. “A lot of good things are happening with Mexico,” Trump told the media. “Mexico understands that we’re going to close the border, or I’m going to tariff the cars.”

It’s the latest in a series of car tariff threats; for the most part, they’ve been used as an economic bargaining chip. While this appears to be in the same vein, it also represents some backsliding against his earlier claims.

Initially, the president planned to close the border immediately, without any mention of automotive tariffs. But taxing imported vehicles has been a reoccurring theme during his tenure as commander-in-chief — making his latest threat to Mexico equal parts surprising and not. And that also makes it difficult to know how seriously to take him, despite assurances that he is “not kidding around.”

“I will do it,” he said. “I don’t play games.”

Automotive News reports that Mexican exporters are already considering sending their product into the United States via air freight to avoid a five-mile line of trucks at the border (caused by the Trump administration moving federal agents away from routine customs checks in order to help tackle illegal immigration). Air freight is much more expensive than shipping by ground and is typically only used by suppliers who need to get parts to a needy factory under dire circumstances.

Mexico’s ambassador to the United States, Martha Bárcena, said her country will cooperate with the Trump administration to address the core causes of migration, but added that it would be impossible to halt it entirely. “Migration will never be stopped,” she said. “It is intrinsic to humanity. But what we can do is to do it in a regular way, in an orderly way that protects human rights.”

Trump has said he would still close the border if Mexico doesn’t help curtail large migrant caravans en route to the U.S., though agreed to give the country a year to think about it. No such timeline was available for the tariff threat. However, both solutions would have a huge impact on trade. The U.S. Chamber of Commerce estimates the U.S. and Mexico trade about $1.7 billion in goods daily — and the largest chunk of that belongs to automobiles and their components.

“The whole ballgame is cars,” Trump said. “It’s the big ballgame with many countries.”

[Image: Chess Ocampo/Shutterstock]

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26 Comments on “How Seriously Should We Take Trump’s Mexican Auto Tariff Threat?...”

  • avatar

    Aw man, no more spring break in Cancun? :

  • avatar
    Master Baiter

    It should be clear by now that Trump is all Tweet and no action.

    In fact his threats to build a wall and close the border have only encouraged more illegal immigration.

  • avatar

    wait, didn’t he just “renegotiate NAFTA” to address this?

    panem et circenses. works every time.

  • avatar

    You mean it’s all about the CUVs and SUVs but yeah, I see what you mean. It’s all about the vehicles.

    This will really hurt GM if it comes to pass as they have very much committed to Mexico and the Mexican worker. A lot riding on the new Mexican Blazer, and not just the weight on the tires either, if you know what I mean.

  • avatar

    Why would anyone in Mexico (or anywhere else) trust Trump? They just renogotiated a trade deal that he forced them to re-open, and now he wants to throw this wrench into it? You can bet any trade deal Trump signs with China won’t be worth the paper it is printed on.

    • 0 avatar
      James Charles

      Exactly my thought.

      The EU bent over and were prepared to remove import tariffs on US vehicles if the US did the same and Trump showed his real colours. The 25% pickup tariff killed of 100% fair vehicle trade deal with the EU. The Big 3 can’t afford to not have the 25% pickup tariff.

      I don’t like how the Chinese operate, but if I were the Chinese I would not trust Trump and the nationalist/socialists peddling Trump’s wares.

      • 0 avatar

        @BAF0 – Tariffs are just a small part of the EU protectionist web. For tariffs, you simply cut a cheque, done, not a big deal. It’s EU taxes and technical barriers that kill the deal before it starts.

        It’s not like US automakers, including Toyota, Honda, Nissan etc, can simply load a cars on to boats headed for Europe, in a tariff-free world. What a wonderful world that would be.

        Yet EU cars easily import to the US no problem, except their only setback is something you’re clearly not familiar with, called US “Lemon Laws”

        The EU market is so overly protected, crappy cars (molded for the market) flourish and couldn’t exist otherwise.

        Trump just happens to be the first president to attempt to get “US automakers” a fair shake, around the world, including Toyota, Honda, Nissan, etc.

        The EU has a “pickup tariff” of their very own, 22.5%, yet EU based automakers don’t produce pickups to “protect”.

        It amounts to a political football is all.

        The US “pickup tariff” only exists to counter the EU pickup tariff. Meaning the world has absolutely zero viable pickups to counter, or challenge US pickups, including Tundras and Titans, but obviously Tacomas, Frontiers, Ridgelines, etc, mostly.

        But if you’re serious about “The Big 3 can’t afford to not have the 25%…”, OK name some pickups from around the world, real or otherwise, that has them “concerned” in any way shape or form.

        Especially considering their fullsize offerings, including HDs up to Class 4, are substantial profit centers for Big 3 pickups.

        Start the “list” here… Have I mention US “Lemon Laws” yet?

      • 0 avatar

        @BAF0 – And just call it the “Chicken tax” for the love of god. It’s not like you’re fooling anyone with your new name after you were banned.

  • avatar

    If Trump wants to stop illegal immigration all he has to do is erect wind turbines along the border. The wind turbine noise causing cancer will deter any one from crossing the border. You see how simple it is.

    • 0 avatar

      Wind turbines don’t work unless there’s enough wind. They’re too intermittent to get the job done. Loudspeakers broadcasting rally speeches by all the presidential candidates would definitely work, but might be in violation of the Geneva Conventions.

    • 0 avatar
      James Charles

      Don’t forget climate change doesn’t occur on cold days.

  • avatar

    Trump has exhausted all his credibility…now there is very little incentive for serious parties to engage him given the finite and fully reversible nature of his tenure.

    The only card he has is completely shutting stuff down through emergency powers or executive order….

    The outside world see these fleeting overtures for what they are…..the desperate flailing of an amateur politician.

  • avatar

    Since those car companies are American , it is, as is usual, difficult to see what he is getting at. As they say about smiling babies, maybe it’s just gas.

  • avatar

    Personally, I try to avoid Mexican built cars.

    USA = fine
    Canada = fine
    Western Europe = fine
    South Africa = fine (they arguably are better at building BMWs)
    Eastern Europe = fine
    Brazil = fine

    Basically, the only ones I have issue with are Mexico and China. In both cases, the sheer regulatory arbitrage taking place (environmental / worker protections) is simply too much, especially since it’s not like that savings is passed to the customer.

  • avatar

    It was said before, he’s all talk and no action. His pattern is to create a crisis via tweet and then “fix” it by reversing course or abandoning his idea because no one around him implements it and he’s too lazy and incapable of enacting his ideas. Big companies that were previously worried about him mostly ignore him now. As most of us should.

  • avatar

    That twitter based diplomacy – you can forget about it – it is just random thoughts – so 21st century – you cannot make it up. It applies to to anyone who is using twitter, FB etc to deliver “messages”, like Elon Musk, AOC and complete zoo of Dem pres. candidates. Presidential elections in the West increasingly start looking like circus. Watch out the coming primaries- it will be lot of fun – prepare popcorn. The New Green Deal alone worth Oscar nomination for the best comedy screenplay.

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