Two of Donald Trump’s biggest campaign vows were “We’re going to build a wall,” and “Mexico is going to pay for it.”
It appears that both deeds might happen sooner, rather than later.
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In his latest “Twitter” storm, Donald Trump left nothing to doubt when he tweeted “Mexico has taken advantage of the U.S. long enough. Massive trade deficits & little help on the very weak border must change, NOW!” (Source: “Trump Warns Mexico: “Taken Advantage Of US For Long Enough… Must Change Now,” Zero Hedge, January 27, 2017.)
This comes on the heels of two executive orders that Trump signed on Wednesday. One such order mandates the immediate construction of a wall on the border of Mexico, and a second order moves to strip federal money from “sanctuary” cities and states, in which Mexicans make up a large majority. In response, Mexican President Enrique Peña Nieto cancelled a meeting with Trump scheduled for next week.
Even as U.S.-Mexico relations took a swan dive over these latest actions, the worst may still be yet to come.
Although the executive order mandating the wall did not specifically state that Mexico will pay for it, payment may come through stealth. Major media outlets are reporting that Donald Trump is considering a 20% import tax on Mexican goods crossing the U.S. border.
As the U.S. goods and services deficit with Mexico was about $58.0 billion in 2016, such measures could raise $11.6 billion at today’s level. Similar trade deficits have been accruing for many years so, if tariffs are enacted, this would likely be re-occurring revenue; revenue which would accrue way beyond the total cost of the wall.
What happens next is still to be determined, but Mexico is in a tough spot. The Mexican government doesn’t have much leverage in its battle against Trump. America is by far its biggest trading partner, so any damage in trade relations would have devastating impact on an already- teetering economy. And the Mexican peso hit all-time lows against the U.S. dollar earlier this year.
Hard place, meet rock.
