COMMENTARY:
Most people think that time flies by quickly when you are busy and have a lot on your plate. I think that this certainly applies to Mexican President Claudia Sheinbaum. Upon assuming office nearly a year ago, she immediately had to deal with powerful drug cartels and organized crime that had infested not only the legitimate business community, but also politics from local to federal levels. She was criticized for supporting her predecessor’s effort to have Mexican judges elected instead of appointed. Many experts say that this will allow big money groups, legal and illegal, to buy judgeships, and thus erode Mexico’s democracy.
And then there is Sheinbaum’s juggling act with the U.S. She has had to deal with President Trump threatening to invade Mexico to attack the drug cartels that are fabricating and sending drugs to the U.S. She has repudiated this approach and called for the U.S. to respect Mexico’s sovereignty. Finally, she is dealing with U.S. tariffs on Mexico imports, which Trump imposed earlier this year and then quickly suspended them, but not the 50 percent tariffs on Mexican steel and aluminum. Currently, the Trump Administration is reviewing its tariff stance with Mexico and has stated that it will stake out a position on these by the end of October. Trump has complained that the U.S. runs an unfair trade deficit with Mexico and that tariffs are the remedy for this. In response, Sheinbaum has tightened immigration flows from Mexico to the U.S. and come down harder than her predecessor on the drug trade.
Just recently, Sheinbaum set import quotas on Chinese footwear products imported into Mexico. Now, she has proposed to raise tariffs between 10 to 50 percent on more than 1,300 imports from Asian countries such as China and India. These tariffs are estimated to total $52 billion. She is pondering raising tariffs on Chinese auto imports to 50 percent. Last year, China exported $90.23 billion to Mexico, while importing only $9.08 billion of Mexican products. India exports $7 billion in products annually to Mexico, but it only imports approximately $2 billion from Mexico, mostly in petroleum products, resulting in a $5 billion trade deficit. Sheinbaum is even targeting Russia, with which Mexico has exported $13 million and imported $625 million from that country so far this year.
I remember very well how Mexico’s shoe and clothing market were starting to be upended by Chinese exports of these products to Mexico in the 1990s, when Mexico started opening up its previously federal government-directed economy. Asian exports to Mexico continue to grow, so Sheinbaum can use the aegis of protecting Mexican markets, even though these imports are really not the central pressing issue for its overall economy.
Most likely, Sheinbaum is playing copycat diplomacy by taking a page of the Trump playbook to use tariffs for another purpose than simply protecting markets. Many diplomacy experts have lauded Sheinbaum on the way she has handled her relationship with Trump, even when he tends to offend and belittle her country. By mirroring Trump’s tariffs on China, India, and Russia, she could be attempting to curry Trump’s favor in an attempt to avoid the U.S. imposing tariffs on more Mexican imports at the end of October. Certainly, Sheinbaum does not want tariffs imposed on other Mexican products.
Sheinbaum’s approach towards Asian imports brings with it two major risks. First, China and India are the world’s largest populated nations, with huge market potential for Mexican products. Mexico also needs a wide variety of components and raw materials, particularly from China for its industrial base, especially in its maquiladora (twin plant) industry. As is the case in the U.S., many Mexican companies cannot automatically and quickly substitute these Chinese products from other countries. China could play hardball with Mexico, which could hurt Mexico’s export-dependent economy. China’s Ministry of Commerce has already stated that “We hope Mexico will be extremely cautious, and think twice before acting.” This is not a direct threat, but it could be interpreted as a threat, nonetheless.
If Sheinbaum’s main objective is to develop goodwill with the U.S., as its northern neighbor considers tariffs on more Mexican products and as the U.S.-Mexico-Canada-Agreement goes into its five-year review next year, there is also a threat in this approach. Under Trump’s leadership, the U.S. has developed a reputation as not valuing traditional trade and diplomatic relationships, and being somewhat erratic in its approach. Sheinbaum could develop bad blood with Asian nations and then find out that it is not on solid ground with the U.S. when it comes to trade. Furthermore, if the U.S. comes down hard on its trade with Mexico, Sheinbaum forgoes the option of courting a closer relationship with countries that could be an option to soften the blow if more of its exports to the U.S. get tariffed.
Sheinbaum has to walk a very fine line with the approach she takes, as she will be in the middle of the U.S. and China, the world’s two largest economies. If she plays it wrong, she could be fighting a trade war with each of them. What she is facing are probably the most difficult foreign decisions in her young presidency.
Jerry Pacheco is the president of the Border Industrial Association. Jerry Pacheco's opinions are his own and do not necessarily reflect the views of KRWG Public Media or NMSU.