Mexico Hopeful of Avoiding Tariffs That Trump Says Will Happen

Date: Thursday, June 6, 2019
Source: Sourcing Journal

Mexican leader Andres Manuel Lopez Obrador said he’s hopeful that Mexico will reach a deal to escape U.S. tariffs, even as President Donald Trump said he’ll probably impose the duties as planned.

At a news conference Tuesday in Mexico City, Lopez Obrador said that he believes the nations will find a way to keep tariffs from being imposed before next week’s deadline. Trump last week threatened to slap 5% duties on all Mexican goods on June 10 and increase the duty to 25% by October unless the country steps up its work to fight illegal immigration.

Trump, speaking shortly after Lopez Obrador during a visit to the U.K., said the U.S. will likely move forward with applying the 5% tariffs to Mexican products next week.

Mexican representatives met with the U.S. Commerce Secretary Wilbur Ross and Agriculture Secretary Sonny Perdue Monday and will meet with U.S. Trade Representative Robert Lighthizer on Tuesday, Ebrard said. The Mexican delegation will present a migration proposal on Wednesday, said Ebrard, who is due to meet Secretary of State Mike Pompeo and Ross that day.

Mexico has indicated that it’s prepared to retaliate against the tariffs, choosing retaliatory measures strategically rather than impose blankets duties on U.S. goods.

Still, Mexican Foreign Minister Marcelo Ebrard told reporters Tuesday that he sees 80% odds of his country negotiating a solution that leads to it avoiding the duties. “We are going to find a common ground I think,” he said at a news conference at the nation’s embassy in Washington.

Mexico’s peso gained for the first time in four days, rising 0.8% to 19.6269 per dollar at 10:39 a.m. in New York.

Trump administration officials have said that they believe exerting economic pressure on Mexico could be an effective way of convincing Mexico to ramp up efforts to halt undocumented immigration across the U.S.-Mexico border and crack down on drug cartels. The president said on Sunday that he’s “really okay” with imposing tariffs on Mexico should negotiations to strike a deal fail, and the move may even bring back “companies and jobs” to the U.S.

The tariff threat has led several economists to forecast an increased risk of a recession in the world’s largest economy and predict it would weigh on growth since trade between the neighboring countries is so highly integrated.

Should the tariffs be imposed, economists polled by Bloomberg said the action would dent growth and fan headwinds that will prompt both countries’ central banks to cut interest rates in the next year. A slight majority of 27 analysts expect levies on Mexico imports to reach a maximum of 5% or 10%, according to a Bloomberg News survey conducted from Friday to Monday. Most respondents see the levies as short lived, with 60% saying they’ll be lifted by the end of September.

The tariffs could push up the cost of vegetables for grocery sellers such as Walmart Inc., Kroger Co, Sprouts Farmers Market Inc., according to Bloomberg Intelligence’s senior industry analyst Jennifer Bartashus. “Produce is a key traffic driver into stores, and higher input costs could force retailers to either absorb higher costs to preserve a competitive stance or pass through prices to customers,” she wrote in a note on Tuesday.

Congressional Republicans have discussed taking legislative action to head off Trump’s plan to impose tariffs, a person familiar with the matter said on Monday. GOP lawmakers are considering whether to revive a resolution of disapproval over the national emergency declaration that underpins Trump’s justification for the tariffs, according to the person.

 

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