Donald Trump’s plan to impose escalating tariffs on Mexico has drawn a bipartisan political backlash and a threat of possible legal action from business groups, as lawmakers and executives on both sides of the border fret about the sudden new threat to North American economies.

Officials at the US Chamber of Commerce, the largest US business lobbying group, said the move by Mr Trump jeopardised the prospects for ratification of the deal reached with Mexico and Canada to revamp the Nafta trade agreement. They also said that they were exploring legal avenues to halt the tariffs, for which the White House invoked emergency powers to deal with what it calls a migration crisis.

Jay Timmons, the president of the National Association of Manufacturing, one of the biggest lobby groups for US industry, warned on Friday that melding trade and immigration created a “Molotov cocktail of policy” that was bound to cause suffering. 

“These proposed tariffs would have devastating consequences on manufacturers in America and on American consumers,” Mr Timmons said. “We have taken our concerns to the highest levels of the administration and strongly urge them to consider carefully the impact of this action on working families across this country.”

In Mexico, Gustavo de Hoyos Walther, president of business lobby group Coparmex, said in a radio interview on Friday morning that the levies would be “a tremendous setback”.

READ ALSO  China's 2020 economic performance helps global economy: media

“It is impossible to calculate the seriousness at this point; it would be a regression of 35 or 40 years in the relationship between the countries,” he added. 

The dismay was fuelled by the unexpected nature of Mr Trump’s move. Although tensions over immigration have been simmering — and occasionally flared up — between Washington and Mexico City, few lobbyists, investors, or officials believed that the US president was willing to engage in a tariff battle of this kind.

According to the plan unveiled on Thursday, the White House will impose levies of 5 per cent starting on June 10 on all Mexican products — and if the US judges that Mexico has not taken sufficient steps to contain migration, they will gradually increase to reach 25 per cent by October.

The US tariff threat appeared to have caught the leftist government of President Andrés Manuel López Obrador off guard. Officials had only just sent the recently negotiated US-Canada-Mexico trade agreement — the revamped version of Nafta — to the Mexican senate for ratification, expecting a quick and easy passage.

“The best trade deal in history, according to Trump himself — and he suddenly throws this in the way”, said Jesus Seade, Mexico’s deputy foreign minister for North America as news of the US move emerged.

Mr López Obrador’s initial response was cautious, calling for dialogue and diplomacy in an open letter to Mr Trump that began “I do not want confrontation”. On Friday, the Mexican president insisted that the ratification process of the new trade agreement would continue despite the latest setback.

READ ALSO  House Democrats ‘ready’ for quick vote on $1.9tn stimulus bill

“I ask that all Mexicans have confidence,” he said in his morning news conference. The president also said that his interior minister had received a message from business mogul Carlos Slim, who expressed his support for the Mexican government.

One of the sectors most likely to be affected is the US automotive industry, which relies very heavily on imports of vehicles and parts. Agriculture could also feel the brunt of potential retaliatory tariffs coming from Mexico. 

“Any barrier to the flow of commerce across the US-Mexico border will have a cascading effect — harming US consumers, threatening American jobs and investment, curtailing the economic progress that the administration is working to reignite,” said David Schwietert, interim president of the Auto Alliance, which represents US and foreign carmakers in Washington. 

As business reeled, Peter Navarro, the White House trade adviser, sought to contain the furore. “I would suggest to investors to look at this calmly, look at what we are trying to do, this is actually a brilliant move by the president to get Mexico’s attention, to get them to help us,” Mr Navarro told CNBC in an interview. “This is not a tariff war here with Mexico in any way shape or form, this is a measure to get Mexico to do what it should be doing.”

The move by Mr Trump was quickly attacked from Congress. Chuck Grassley, a Republican senator from Iowa, criticised the move, and other Republicans, including Joni Ernst, also from Iowa, joined the chorus on Friday. Democrats pounced on the move as well. 

READ ALSO  US joins global vaccine efforts on first day of Biden administration

“America’s loudest President on immigration has failed at our borders,” said Dick Durbin, a Democratic senator from Illinois. “In his frustration, he promises a new round of tariffs raising prices on Americans, killing our jobs, and once again hitting Illinois farmers and businesses the hardest. How much more can our nation take from this ‘stable genius’?”

Via Financial Times