US President Donald Trump said he will impose a 5% tariff on all Mexican imported goods from 10 June 2019, and has threatened to increase this number until the flow of undocumented immigrants across the border stopped.

Tariffs on Mexico

According to Trump, the 5% tariff on all imported goods from Mexico beginning 10 June 2019 would “gradually” increase until the flow of undocumented immigrants across the border stopped (NY Times, 31 May). Further in a follow-up presidential statement, Trump said that the tariffs would be raised to 10% on 1 July 2019 “if the crisis persists” and then by an additional 5% each month, up to a cap of 25%, until Mexico acted.

In a separate tweet, Trump also vowed to bring back US jobs and companies that have moved south of the border, through taxation and tariffs. At present, about 80% of Mexico’s exports go to the US (Reuters, 2 Jun), putting great pressure on Mexico to control migration to reach a deal with the US.

Going Global

Meanwhile, the US-China trade dispute continued, with China releasing an official document blaming the US for the trade war and claiming that the US is an untrustworthy negotiator. This came in response to several US media outlets reporting that Beijing backed out of trade negotiations with the US weeks ago (CNBC, 2 Jun).

Further to that, the fires from Trump’s trade war could spread around the world, including to Japan, Europe and Canada as Trump challenges the post-World War II consensus that free trade enriches the world (NY Times, 31 May).

Source: Macquarie Research - 3 Jun 2019