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México. President Donald Trump’s across-the-board tariffs on goods from Mexico have not only left President Claudia Sheinbaum politically unscathed from likely economic damage but may strengthen her hand as Mexicans rally against perceived unfair treatment.
Mexico’s economy is undoubtedly vulnerable to a trade war. Trump’s 25% tariffs on Mexican products could lead to export losses of as much as $42 billion and a potential 4% hit to GDP, according to a report by the Wilson Center, a Washington-based think tank.
Trump’s tariffs mark a turning point in U.S.-Mexico relations and more than 30 years of economic integration between the two countries. Both countries are each other’s top trading partners on products ranging from avocados to the automobile sector.
But Sheinbaum’s popularity has risen in the face of Trump’s on-again, off-again tariffs and perceived bullying, with her approval ratings reaching 85% according to one recent poll, up 15 points since October. In the U.S., meanwhile, a majority of Americans oppose new tariffs on imported goods, according to a recent Reuters/Ipsos poll.
Part of her rise in popularity stems from her successful appeal to Mexican nationalism and pride in the face of U.S. aggression, fertile ground in a country with a fraught history with its northern neighbor.
There is another factor at play too, according to analysts interviewed by Reuters: Simply put, Mexicans are used to more economic hardship than Americans. So while Mexicans may feel the greater brunt of a trade war, Americans are more likely to punish their politicians for inflation and other effects.
“When you look at just macroeconomic indicators, Mexico’s pain will statistically be greater,” said John Feeley, a former career U.S. diplomat and ambassador with decades of experience in Latin America.
But Mexicans are “used to a hell of a lot more pain than the average U.S. consumer,” he added. “Donald Trump’s curve is far less elastic than Sheinbaum’s when it comes to voters getting mad at stubborn inflation.”
Feeley said Trump’s tariff policies are “a recipe for an impoverished hermit kingdom” in an increasingly isolated United States.
DRASTIC PRICE INCREASES
Automakers on Tuesday warned the 25% tariffs on imports from Canada and Mexico would lead to drastic price hikes on certain models, while Target (TGT.N)
, opens new tab CEO Brian Cornell told CNBC the retail giant would increase prices “over the next couple of days” on some seasonal grocery products such as avocados from Mexico.
Trump has acknowledged previously that “we may have short term a little pain” as a result of the tariffs but that “people understand that,” and longer term it will put the U.S. on a stronger footing.
For Rafael Fernandez de Castro, director of the Center for U.S.-Mexican Studies at University of California San Diego, Mexico has “always seen the U.S. as a rival, as someone we cannot trust.”
“I believe the U.S. consumer is more sensitive to inflation than the Mexican,” he said, explaining that increased welfare support in Mexico will help alleviate some of the impact. Similar support does not exist in the U.S., he pointed out.
In keeping with her appeal to national pride, Sheinbaum said she will outline the Mexican reaction, including retaliatory tariffs, at a rally on Sunday in the capital’s iconic Zocalo square, the heart of both the ancient Aztec empire and modern Mexico.
But some analysts warned Sheinbaum needs to be careful. Geronimo Gutierrez, former Mexican ambassador to the U.S. during the 2017 and 2018 negotiation of the USMCA North American trade pact, said the political wave Sheinbaum is riding will only last so long, especially if the Mexican economy starts to tank.
“It’s not just gaining political points, but actually finding a solution. Those two don’t always point in the same direction,” he said.
An extra safety net for Mexican families is the diaspora, particularly in the United States.
Viri Rios, a Mexican political analyst based in Mexico City, described the remittances sent home by Mexicans working in the U.S. to their families back home as an “escape valve” that can alleviate economic woes, one that Americans don’t have. Despite Trump’s threats of mass deportations, remittances are still expected to be a significant contributor to Mexico’s economy.
“There is always the possibility to work in the U.S. or try to work in the U.S.,” Rios said. “A large percentage of poor families are receiving remittances and that is a buffer in moments of crisis.”
Reuters.com
