Facing an utterly useless and indeed counterproductive Congress, President Trump has embarked on a new strategy to combat what has become a historic invasion from Central America at our southern border: tariffs.
The opening shot is a 5% tariff on all Mexican imports starting June 10. PDT said the percentage will gradually increase — up to 25% — “until the Illegal Immigration problem is remedied,” referring to Mexico’s failure to rein in the surge of Central American migrants crossing their border en route to our own.
The logic is fairly simple. If we can’t trust Mexico, we’ll have to trust Mexico to be Mexico. By that, I mean we must put them in a position of acting in their own self-interest. It must become a tougher proposition for them to sit on their hands and remain on the take of drug cartels and human traffickers than to behave like a civilized society and actually do something about it.
This is, after all, the way things have gotten done around the world since the advent of the nation state and the foreign relations inherent therein. Altruism is a wonderful ideal and one that should be strived for, but no one should be so naive as to think our neighbors and allies will act in our favor for any other reason than self-benefit — or more effectively, self-preservation.
The Trump base is one of action and common sense, and nothing pleases us more to see the two come together in government policy. Thus, it’s a safe assumption that MAGA nation has welcomed this latest move with open arms, especially given the sheer lawlessness that has consumed our border for decades and only gotten worse with the #resistance movement masquerading as a legislative branch of government.
For decades, Mexico has not only turned a blind eye to the masses of migrants violating our sovereignty, they’ve gone so far as to provide them with pamphlets on how best to make the journey and what to do once they’re here. Mexico has spat in our faces for a long time and, quite frankly, any action at all is a step up from the standard apathy that has served as our response for as long as one can remember.
All the same, there are downsides we should be wary of going forward so as not to be blindsided. Let’s examine those now.
Cars Take Biggest Hit
Automotive stocks, including Ford and General Motors, have already begun slumping, which is a reflection of the interdependence of our two nations as it relates to the auto industry. Parts and vehicles manufactured in Mexico represent the biggest chunk of its trade with the U.S., totaling $93 billion just last year.
Thanks to the work of Slick Willy Clinton, the U.S. auto industry has developed deep connections with Mexico over the past 25 years; an arrangement that has worked decidedly in Mexico’s favor. It’s also made cross-border commerce an indispensable aspect of the industry, as parts often cross back and forth many times before ending up in a vehicle.
Exhibit A: Wires. They power everything in a vehicle — from dashboard electronics to the engine ignition to power for windows. Most wiring comes from Mexico, with the remainder coming from China. And profit margins on these components are slim, which means there’s little wiggle room to absorb price increases from tariffs.
Then there are the second and third order effects from tax hikes. Even if a tariff is only 5%, which is relatively manageable, you’ll have logistical problems. We essentially have open-border trade policy right now, but tariffs will bring administrative headaches (added paperwork), staff requirements to deal with it, etc.
Michigan on the Chopping Block
Currently, 17% of the cars Detroit sells are built in Mexico. The early estimates on price hikes as a result of the current tariffs are $1,500 per (average) vehicle, which would naturally lead to a drop in auto sales, though the extent of the decline is up for debate.
That would hit some automakers harder than others. Nearly 1/4 of Fiat Chrysler’s U.S. sales are sourced in Mexico. For GM, that figure is about 16%. Both companies build their highly profitable full-size pickups in Mexico, which compounds the problem.
Automakers have large percentages of foreign auto parts in their vehicles, sometimes more than half. For example, about 44% of the parts used to manufacture the Chevrolet Silverado stem from Mexico, while another 10% is imported from other countries, for example. The concept of “Made in USA” really doesn’t exist anymore, as most cars include parts from multiple countries even when they’re technically manufactured within our borders.
Other Sectors Affected
Carmakers will undoubtedly get the most press, but they’re far from the only folks who stand to feel some pain. Other products that the U.S. imports from Mexico include electrical machinery, at $64 billion in imports, and agricultural imports, at $26 billion. Contrary to popular belief, China is not the largest agricultural supplier to the U.S. That would be Mexico.
Raymond James has released a cost estimate that found U.S. businesses and consumers would shell out approximately $86 billion in tariffs. That’s on top of $62.5 billion in tariffs on Chinese goods already in place, which went into effect today (Beijing time).
Then there are the beloved avocados, which we’ve all been sufficiently fear-mongered on by now. Prices of avocados have already doubled over the last two months just based on tough rhetoric from the administration, which will increase further as tariffs are implemented. The overall effect has been overblown, however, since most of our avocados are grown in California these days.
Other foods that would likely increase in price for American shoppers are berries and asparagus, which are also imported from Mexico. All in all, not too scary.
Effects on the Trade Deal
Unfortunately, PDT may be hurting his own chances at passing a new trade agreement between the U.S., Canada and Mexico, which is a bummer since by all accounts we were just on the cusp of getting it signed.
The United States-Mexico-Canada Agreement (USMCA), the trade deal that was a major campaign promise in 2016 and could be a huge boost the reelection effort, hasn’t yet been ratified by Canada or Mexico, though both countries have reportedly agreed in principle.
Yesterday, the White House formally notified Congress the new agreement is headed its way, something it must do formally 30 days before it can send over legislation to implement the new pact.
Of course, it should be noted that these tariffs may not present as big a threat to the USMCA as our own Speaker of the House, who would rather see America burn than give our president a victory. Up to now, she’s been hesitant to give the thumbs up, presumably to quell the coochie-cap screams outside her office. Ultimately, though, I think she’ll come to the table, as Dims from moderate and red states could receive major backlash for not getting on board with something Dims have promised for the last 20 years: a re-worked NAFTA.
The bottom line is that no effort of this sort can be undertaken without some level of sacrifice. When our country goes to war, sacrifices are made. That math doesn’t change with trade wars.
Will there be a certain level of economic pain? Of course. But it pales in comparison to the pain of losing our sovereignty to third world nations who dump who and what they please on our country with impunity. We simply cannot allow the status quo at our borders to continue. Something must be done, and the president is trying everything he can.
I’ve had my issues with the White House’s handling of immigration from the beginning of the Trump presidency, but those critiques are useless now. The fact is, we have to win this battle and that means supporting our president through the tough decisions and actions that must be made. I do believe PDT needs to address the nation in a forthright way about what is ahead and why it must be done.
In my view, one of the worst mistakes in modern presidential history was made by George W. Bush, who after 9/11 told Americans to go about their lives as if nothing happened. Americans obliged and it’s hurt us ever since. We’re fighting hot wars in multiple countries right now and the average American barely gives it a thought. Be honest — how many times did you think about the war in Afghanistan today?
My point is that these things are only won when a country unites toward a common purpose. For that to happen, we must understand the mission, what that mission will require and why failure is not an option. We absolutely can do this, but in order for that to happen, the pronoun “we” must have real meaning. Wars cannot be done by militaries alone. They must have the support of the nation for whom they fight. Likewise, the sacrifices incurred by trade disputes must be shared by more than those companies on the front lines.
We must ask ourselves, how can we make ourselves more self-reliant? How can we as an American population pool our economic power to mitigate the effects of penalizing those countries who have done so much damage to our sovereignty, national security and economic welfare?
Mr. President, we can do this. We need you to lead the way — with honesty, inspiration and resolve. Let this be your finest moment.
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