Published: Wed, June 06, 2018
Economy | By Melissa Porter

Mexico to impose tariffs on US goods

Mexico to impose tariffs on US goods

"The Trump administration has taken some incredibly positive steps for the American economy, but tariffs will undercut that progress and needlessly hamstring our full economic potential", said Tim Phillips, president of Americans for Prosperity, a Koch advocacy group.

American pork producers, for whom Mexico is the largest export market, were dismayed by the move.

But the administration's gambits also seem to be producing ire and bafflement rather than dialogue and cooperation.

Meanwhile, Trump advisor Larry Kudlow revived the possibility on Tuesday that the president will seek to replace the trillion dollar North American Trade Agreement (NAFTA) with bilateral deals with Canada and Mexico, a move that both countries say they oppose.

What's more, Washington's new strategy could prove a hard sell in Ottawa and Mexico City, with the Canadians and Mexicans still furious over Trump's decision last week to impose tariffs on their steel and aluminum shipments.

Nearly 90 minutes later came the White House's summary of the call, which did not mention any blunt tariff talk by Trump's British counterpart.

United States commerce secretary Wilbur Ross and Chinese vice premier Liu He held talks in Beijing over the weekend, but failed to deliver a joint statement at the end of the meeting. The 78-year-old cited health reasons in a letter distributed to company officials on Tuesday morning.

"If the United States introduces trade sanctions including tariffs, all the economic and trade achievements negotiated by the two parties will be void", China's official news agency Xinhua said Sunday.

The EU, Canada and Mexico had previously been granted exemptions after the announcement in March. Other countries are moving forward without us.

"If our customers around the world start going to other parts of the world for their supplies, that is a serious problem", he said.

Mexico said on Monday it will file a complaint with the World Trade Organization over United States tariffs on its steel and aluminum.

Tory MP Jacob Rees-Mogg warned earlier that "tit-for-tat retaliation" could make a trade war worse, saying history shows "protectionism is worst for the country that imposes it".

Trump has frequently called out allies for being unfair on trade, arguing that they have high tariffs that block out American goods and lead to trade imbalances.

"Despite the strong incentives to avoid a trade war with the [United States], China can not tolerate the perception that it has yielded to United States demands", analysts at investment bank Nomura said in a research note Monday.

"In the short term, you can coerce all sorts of people successfully if you have leverage", says Stephen Biddle, a defense policy expert at the Council on Foreign Relations.

Is it worth the risk? "The UK and the European Union must stand up to this behaviour and restore the rules-based system".

In this view, the big culprit for current trade imbalances is China, and the best way to deal with Beijing is by building a coalition of trade allies to demand change. "We are hurt and we are insulted", she added.

Another trade war is brewing - one between President Trump and the Koch brothers.

The mainstream view of trade wars has always been that nobody "wins" them.

The rally in the stock market also proves that investors don't believe the G-7 has the power to influence the US decision to impose tariffs despite its expressed "concern and disappointment". China has threatened to retaliate by placing its own tariffs on roughly $50 billion of American products, and Mr. Trump responded by threatening tariffs on an additional $100 billion of Chinese goods.

In 2017, USA exports to China were valued at US$130.4 billion, meaning China's offer would amount to a 53.8 per cent increase. But there's no guarantee that a damaging trade war will be avoided.

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