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MEXICO CITY — President-elect Trump’s pledge to enforce tariffs connected Mexico and Canada threatens to upend decades of North American integration, a bumpy process that’s recast the 2 U.S. neighbors arsenic providers of earthy and finished goods for the world’s biggest economy.
In immoderate ways, Canada and Mexico person traded places implicit the past 3 decades.
Before the North American Free Trade Agreement (NAFTA), Mexico was a mid-tier petrostate without a competitory concern base. Now, its system is babelike mostly connected manufacturing, tourism, cultivation exports and currency sent location by Mexicans abroad.
Meanwhile, Canada went from a tiny but precocious manufacturing system to an lipid and state giant, funneling monolithic amounts of hydrocarbons to the United States.
Those transformations person some taken spot to acceptable neatly into the U.S. economy’s larger needs.
But that three-way integration is facing headwinds, not slightest from Trump, who connected Monday threatened United States-Mexico-Canada Agreement (USMCA) partners with 25 percent across-the-board tariffs connected time 1 of his presidency successful retaliation for their roles successful migration and the illicit fentanyl trade.
“Both Mexico and Canada person the implicit close and powerfulness to easy lick this agelong simmering problem. We hereby request that they usage this power, and until specified clip that they do, it is clip for them to wage a precise large price!” Trump posted connected Truth Social.
At risk, beyond the harmony of North American diplomatic relations, are the fundamentals of the continent’s manufacturing base.
“The worth chains — the worth chains person been designed astir the discourse of integration,” said Ildefonso Guajardo, Mexico’s erstwhile caput of Economy and pb negotiator connected the USMCA
Value chains oregon proviso chains — producing and assembling parts passim the continent earlier putting them into a last merchandise — person go a cardinal competitory vantage for North American manufacture writ large, and the raison d’être for a wide conception of Mexican industry.
Those chains lone beryllium successful Mexico acknowledgment to monolithic infrastructure investments, ranging from roadworthy and obstruction connections to state pipelines to concern parks that tin screen astir 10,000 acres.
And the worth chains widen beyond automotive oregon TV manufacturers. For example, the state pipelines successful Mexico are pumping U.S. earthy gas.
Overall U.S. exports of the hydrocarbon, including pipeline exports and liquefied earthy state exports connected ships, person ballooned since 2014, erstwhile the United States sold 1.5 trillion cubic feet of state abroad, to 7.6 trillion cubic feet successful 2023, according to the U.S. Energy Information Administration (EIA).
Pipeline exports spell exclusively to Canada and Mexico. In 2014, Canadian imports began to plateau astatine astir a trillion yearly cubic feet of gas, and Mexican pipeline imports took off, reaching 2.24 trillion cubic feet successful 2023, according to EIA.
Though vigor and manufacturing are by acold the biggest segments successful North American trade, nutrient supplies person besides gone done a monolithic transformation, opening markets for U.S. atom and Mexican nutrient that person boosted agrarian areas successful some countries.
“These are American farmers’ 3 largest export markets,” said Farmers for Free Trade Board President Bob Hemesath, an Iowa corn, soybean and hog farmer, referring to Canada, China and Mexico. “America exported $84.7 cardinal successful nutrient and ag to these 3 countries unsocial past year, constituting astir fractional of each nutrient and ag exports. Mexico and Canada besides person been partners successful USMCA and NAFTA, agreements that person grown U.S. ag exports to those countries by astir 300 percent,” Hemesath added.
“We don’t yet cognize precisely what enactment President Trump volition instrumentality erstwhile helium enters office. But we bash cognize that a renewed commercialized warfare volition wounded American farmers. A commercialized warfare volition mean retaliatory tariffs, mislaid ag commercialized markets, a limb up for workplace exporters successful South America and elsewhere, and billions successful mislaid exports.”
Trump, who opposed NAFTA, has successful the past threatened to stroke up the economical integration that resulted from the 1994 deal.
He forced the dialog of USMCA to regenerate NAFTA during his archetypal term, and though the 2 deals had galore similarities, astatine the USMCA signing ceremonial helium declared the extremity of “the NAFTA nightmare” and called the caller statement a “truly just and reciprocal commercialized woody that volition support jobs, wealthiness and maturation close present successful America.”
Renewed attacks against USMCA are frustrating for immoderate of NAFTA and USMCA’s defenders, astir of whom were not pining for a renegotiation of the archetypal woody successful 2017.
“Well, basically, what it loses is credibility. Because, arsenic you remember, this statement was negotiated by the Trump administration, and erstwhile a state is not backing its words, successful this case, negotiated by the incoming president, well, the archetypal happening you suffer is credibility,” Guajardo said.
“Who is going to judge you adjacent clip you springiness your connection to an agreement, careless of the quality of the agreement?”
That broader concern, with greater geopolitical considerations, is making immoderate observers weary.
“Violating the presumption of our ain agreements lone ruins our estimation and loses everyone's spot successful the USA. And making our communal defence alliances ‘pay arsenic you go’ Mafia-style extortion rackets volition not help,” said a erstwhile U.S. commercialized negotiator who asked for anonymity to talk frankly.
But there’s a wide designation that the instability is simply a feature, not a bug, of Trump’s diplomatic style.
Rep. Henry Cuellar (D-Texas) of Laredo, a vocal proponent of U.S.-Mexico trade, told NewsNation’s Blake Burman on “The Hill” that Trump volition astatine the precise slightest get Mexico’s attraction with the threats.
“Well, fto maine enactment it this way: Laredo’s the largest port; we grip 40 percent of each the commercialized betwixt the U.S. and Mexico. I cognize this is simply a mode to negotiate, get immoderate leverage. I cognize that Mexico volition travel to the table,” said Cuellar.
“But cipher wants a 25 percent tariff connected them, and the Mexicans are threatening to bash the aforesaid thing, and we don’t wanna get into that.”
In 2019, Trump successfully leveraged tariff threats against erstwhile Mexican President Andrés Manuel López Obrador to unit Mexico to heighten its interior migration enforcement.
President Claudia Sheinbaum, López Obrador’s successor and protégé, responded to the renewed threats with a missive raising different grievances, including U.S. illicit weapon exports and cause consumption, and vowing tit-for-tat tariffs connected U.S. goods.
Mexico is the biggest importer of U.S. goods, including vigor products specified arsenic earthy gas.
“President Trump, migration and cause depletion successful the United States cannot beryllium addressed done threats oregon tariffs. What is needed is practice and communal knowing to tackle these important challenges,” wrote Sheinbaum.
“For each tariff, determination volition beryllium a effect successful kind, until we enactment astatine hazard our shared enterprises. Yes, shared. For instance, among Mexico’s main exporters to the United States are General Motors, Stellantis, and Ford Motor Company, which arrived successful Mexico 80 years ago. Why enforce a tariff that would jeopardize them? Such a measurement would beryllium unacceptable and would pb to ostentation and occupation losses successful some the United States and Mexico.”
Sheinbaum’s U.S.-Mexico imaginativeness — excluding Canada — was a reflector representation of Canadian Prime Minister Justin Trudeau’s ain reaction, touting U.S.-Canada relations and subtly taking digs astatine Mexico. Trudeau besides reportedly met with Trump astatine his Mar-a-Lago edifice connected Friday.
“Trump is ever utilizing disagreement and conquer-type techniques. At immoderate point, I judge that that should beryllium a good understood by the different 2 parties, it is simply a vessel that we're each sharing. There are a batch of Canadian companies successful Mexico," Guajardo said. "Canada has a batch to suffer if Mexico is not successful the agreement."
"So careless of governmental rhetoric, that is arising by the adjacent elections successful Canada, I deliberation that astatine the end, astir firm Canadians and Mexico volition person to look astatine this, arsenic we did successful the archetypal negotiation," helium added.
That stake that cooler heads volition prevail besides hinges connected the incoming Trump administration’s appetite for risk.
There is wide statement among economists that a commercialized warfare with Canada and Mexico would rise prices for American consumers, but some countries’ relationships with the United States are asymmetrical, meaning they each basal to suffer overmuch much than Trump.
And portion of Canada’s statement against Mexico — that the Latin American state has a overmuch much extended commercialized narration with China — could backfire, giving Mexico leverage successful bilateral negotiations to accidental it volition person nary prime but to further grow those ties.
Yet adjacent that leverage would apt beryllium insufficient successful the look of a Trump medication consenting to vessel North American integration.
“Mexico could astir apt negociate a bilateral statement oregon possibly sectoral accords with the USA nether caller and astir apt disadvantageous and asymmetric conditions,” said Victor Arriaga, a erstwhile Mexican diplomat and exertion of a regular newsletter successful Mexico connected U.S. politics.
“China is nary substitute for USMCA; successful presumption of costs and concatenation supplies, the U.S. marketplace would inactive stay attractive. Access to the U.S. marketplace of goods produced successful Mexico with Chinese exertion would yet look difficulties. Historically, Mexico’s attempts to diversify commercialized partners person had constricted success.”
But consequences for the United States, adjacent if commercially advantageous, could make planetary shockwaves.
“When the U.K. near the EU it lone screwed itself, but if we permission the USMCA and NATO and each our different alliances, it volition screw the world,” said the erstwhile U.S. commercialized negotiator.
