Mexico starts to fight back in earnest against Trump’s US border wall and protectionism threat

Former president Vicente Fox takes a bat to a Trump-shaped piñata in September.

Vicente Fox wants you to know that Mexico is not paying for ‘that fucking wall.’

Though US president Donald Trump officially took office just six days ago, his willingness to push his key campaign proposal of building a border wall along the southern border of the United States has already touched off a diplomatic crisis with Mexican officials. After Trump enacted an executive order (of somewhat dubious legality) instructing the federal government to start construction on the wall, Mexico’s president Enrique Peña Nieto cancelled a planned trip to meet Trump in Washington today.

Though Peña Nieto welcomed Trump on a surprise campaign visit to Mexico City last summer, backing down from confronting someone who was then just the Republican Party presidential nominee, Wednesday’s executive order and the White House’s insistence that Mexico will pay for the wall led Peña Nieto to push back in a video message late Wednesday night. Trump responded with his own Twitter rant on Thursday, essentially daring Peña Nieto to cancel the meeting, during which the two presidents planned to discuss cooperation on security and renegotiation of the North American Free Trade Agreement.

No one, however, has been more outspoken against Trump than Fox, who served as president between 2000 and 2006 and who has railed against Trump’s proposed border wall, routinely in profane terms. In September, Fox gleefully took a bat to a Trump-shaped piñata and, upon completion, noted that Trump was just was empty-brained as the empty piñata.

Fox is a former president who knows a little something about political revolutions.

In 2000, he became the first president in seven decades from outside the long-governing Partido Revolucionario Institucional (PRI, Institutional Revolutionary Party). His election, to this day, represents a watershed moment in Mexico’s multiparty democracy. Fox (and his successor) are members of the conservative Partido Acción Nacional (PAN, National Action Party) that held the Mexican presidency for 12 years — until the telegenic Peña Nieto’s election in 2012, when the PRI returned to Los Pinos. Fox, like George W. Bush in the 1990s, was a governor, and before the Sept. 2001 terrorist attacks refocused the Bush administration’s efforts, the two presidents had hoped to work together on immigration reform and deeper harmonization between the two countries, a priority that fell to the back burner with two wars in Afghanistan and Iraq.

Fox, for his part, left office with few real accomplishments, with none of the promise fulfilled from the early days of the Bush administration.

Since Peña Nieto took office in 2012, however, his approval ratings have tanked to nearly single digits for many reasons — personal corruption scandals, incompetence, ongoing crime and cartel activity, corrupt police and a 20% rise in gasoline prices that took effect at the beginning of this month. His widely panned performance last summer, when he failed to stand up to Trump during the US election campaign, only helped depress his approval ratings. But make no mistake, Peña Nieto would still be a failed president today, even without Trump’s help.

Donald Trump has signed several executive orders in his first week as president. (Facebook)

Nevertheless, as Mexico’s 2018 election approaches, with the PRI’s chances of retaining either the presidency or control of Mexico’s legislature dwindling, Peña Nieto has every incentive to push back against Trump on both the border wall and against any NAFTA deal that would significantly hurt Mexican workers and consumers. That’s one reason Fox has pushed back so hard against Trump — the PAN hopes to win back power next year, and who better to make the most vulgar case against Trump than an elder statesman who was always something of a wild cowboy himself.

Mexican voters may yet decide to elect a ‘Trump’ of their own, given the widespread disillusion with the political establishment embodied by both the PRI and the PAN. That could mean a hard-left turn to former Mexico City mayor Andrés Manuel López Obrador, who is running for the third consecutive time, and who would respond to Trump with protectionist measures of his own. It might also mean that voters turn to the feisty independent governor of Nuevo León, Jaime Rodríguez Calderón (routinely referred to as ‘El Bronco’), whose bluster matches Trump’s — and then some. So figures in both the PRI and the PAN worry that if they fail to stand firm against Trump, Mexican voters will find officials in 2018 who will.

The bottom line is that Mexico has its own political environment, and as July 2018 approaches, the incentives will be for Peña Nieto (and every other politician in Mexico) to stake out increasingly nationalist responses to Trump in defense of Mexican dignity and sovereignty. So when White House spokesman Sean Spicer suggests that the Trump administration might administer a 20% import tax on Mexican goods, it can only drive counterparts in the Mexican government further away from any kind of deal with the United States. (Spicer has since walked back that comment, indicating that he was referring to the border adjustment that is part of the Republican congressional tax reform plan).

The Trump administration, in six days, has nonetheless managed to worsen relations with its southern neighbor to a point not seen since the 1920 Mexican revolution (or possibly since the US-Mexican war of the 1840s). Still, Trump is happily and knowingly picking a fight with the Mexican government, under the impression that the United States has most of the leverage in his push to renegotiate NAFTA, slap protective tariffs on Mexico and attempt to force Mexicans to pay for what even most American policymakers believe a wasteful border security wall.

Ironically, if the point of the border wall is to restrict Mexican immigration, it’s about 30 years too late.  Mexican immigration to the United States peaked in the 1990s and the 2000s, and the net migration rate was even negative for several years after the 2008-09 financial crisis. If the idea is to prevent further immigration from south of the border, the far greater numbers now come from Central America. But the United States depends on Mexico’s efforts to apprehend and reverse northward migration flows from Central America as part of the billions that the Mexican government spends annually on security that directly and indirectly benefits the United States.

More ominously, Trump’s protectionism would be a net lose-lose for the two countries. Though Trump has complained about the $58.8 billion trade deficit with Mexico (as of 2016), the deficit masks the larger extent of the trading relationships, which represents exports of 211.8 billion and imports of $270.6 billion. That makes Mexico the third-most important trading partner for the United States and the two-largest destination of American exports. Those exports, by the way, include a massive amount of corn, so a slowdown in trade would hurt farmers across the American Midwest — states that turned sharply in 2016 for Trump. Those imports, too, include many cheap textiles and everyday goods that American consumers currently enjoy. They also include nearly four-fifths of the avocados that Americans consume (at exponentially greater rates) — a 20% tariff on Mexican imports would ultimately become a 20% price increase on the guacamole in your next order at Chipotle.

Trump and his adviser argue that Mexico’s value-added tax (essentially a national sales tax) represents a hidden barrier to trade. But all goods and services in Mexico are subject to the VAT, whether produced domestically or internationally. But they forget that there are also sales taxes in the United States. If you’re selling products in New York City, for example, those products are subject to nearly a nearly 9% state and city sales tax.

Ultimately, Mexico could decide that no deal is better than a bad deal with the Trump administration and walk away from NAFTA altogether. If Mexico did so, it would surely hurt, though cross-border trade would still be subject to the rules of the World Trade Organization and, theoretically, subject to the relatively low-tariff regime that the WTO system establishes. But the end of NAFTA would also hurt the United States, its economy and up to six million jobs that are dependent on exports to Mexico.

Moreover, a trade war with Mexico would not occur in some bilateral vacuum. You could imagine many other countries in Latin America boosting Mexico with aid or loans as it stands up to the Trump administration, just as Cuba found a half-century of patrons in the Soviet Union, China and Venezuela. Speaking of China, you can just imagine how excited the world’s second-largest economic power would be to swoop in to establish greater trade links and development ties to a massive market of over 125 million people. Once established, those Chinese-Mexican ties would be difficult for future American administrations to unwind.

Ultimately, the coming trade war that Trump threatens to prosecute with Mexico would be an unmitigated forced error for American policymaking — in a country that is quite literally in the backyard of the United States. Amazingly, however, that seems exactly where the Trump administration is heading.

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