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By Laurence Iliff
Automotive News

The exemption of Mexico from President Trump’s tariffs on steel and aluminum was a lifeline for the renegotiation of the North American Free Trade Agreement, but at the same time Mexican officials fear the tariff issue could be used as a bargaining chip to force concessions in the broader auto sector.

Well before Trump’s announcement last week, the White House had signaled that Mexico and Canada could be left off the list of countries targeted for punishment, and Mexican negotiators were already wary of the fine print.

Trump’s words only confirmed their suspicions when he seemed to link the metals tariffs with the 24-year-old trade deal that is being renegotiated in great part because of Mexico’s big and growing trade surplus in autos and auto parts.

“Due to the unique nature of our relationship with Canada and Mexico, we’re negotiating right now NAFTA, and we’re going to hold off the tariff on those two countries to see whether or not we’re able to make the deal on NAFTA,” Trump said at the event announcing the tariffs.

The initial reaction in Mexico was positive, since the alternative would have further complicated the NAFTA talks. Mexico has made the argument that the accord is designed specifically to avoid unilateral trade measures by its members.

“This is great news for Mexico,” said radio commentator Joaquin Lopez-Doriga. He noted that Jared Kushner, Trump’s son-in-law and adviser, had met with Mexican President Enrique Pena Nieto in Mexico a day before the tariff announcement.

But the skepticism took over from there.

The process of negotiations for the modernization of NAFTA continue on course in an independent manner from this or any other measure of internal politics taken by the United States government,” Mexico’s Economy Ministry said in a statement after Trump’s announcement.

“Mexico reiterates that the negotiation of NAFTA must not be subject to conditions outside of that process.”

Financial analysts noted that hitting Mexico with steel tariffs would not make much economic sense for the U.S., which enjoys a surplus in the steel trade of $3.6 billion a year with Mexico, according to the bank UBS.

“Taxing Mexico when Trump is already ‘winning’ does not make sense,” UBS said in a research note.

Eduardo Solis, president of the Mexican Automotive Industry Association and a former trade negotiator, said the U.S. already was going out on a limb by claiming that the steel and aluminum tariffs were needed for national security.

“If national security is that Mexico sends steel, or Canada sends steel, two of the [U.S.] great allies, then I don’t know what national security has to do with this,” Solis said at a news conference before Trump’s decision to exclude Mexico.

You can reach Laurence Iliff at

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