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Mexico Warns of Retaliation for U.S. Tariffs, Urges Talks

By Anthony Harrup 

Mexico is weighing its options to respond to the threat of U.S. tariffs on all of its exports, including possible retaliation, but would rather convince the Trump administration that a negotiated solution is in the best interest of both countries, senior officials said Monday.

A high-level Mexican delegation led by Foreign Minister Marcelo Ebrard is in Washington this week for meetings with U.S. officials to discuss ways of reaching an agreement after President Trump threatened a 5% tariff on all Mexican imports starting June 10 unless Mexico does more to stem the flow of Central American migrants crossing its territory to reach the U.S. The tariffs would rise each month to reach 25% by October, Mr. Trump said.

Mexican Economy Minister Graciela Márquez said there are several roads that Mexico could take if the U.S. goes ahead with the tariffs. The first would be to resort to multilateral organizations such as the World Trade Organization, although she acknowledged that those processes are slow. The other is to hit back with tariffs on selected U.S. goods.

"We're evaluating those possibilities. We're getting prepared but we trust that diplomacy and actions to persuade and convince to maintain integration and trade relations will work," she said. "We don't want to use tariffs to damage value chains, or to damage the creation of jobs, or damage investment, rather we want free trade to prevail in North America."

Last year Mexico retaliated against U.S. tariffs on steel and aluminum with its own tariffs on $3 billion in imports from the U.S., including bourbon, pork and steel products. That dispute was settled with an agreement reached last month.

Mexican officials Monday that the threatened tariffs would hurt both countries, with effects on consumers and employment that go well beyond the direct monetary impact on Mexico's roughly $350 billion annual exports to the U.S.

With the integration of supply chains, some auto parts cross the border as many as eight times before a vehicle is finally assembled -- or four times from Mexico to the U.S., each of which would carry a 5% tariff, said Jesús Seade, Mexico's deputy foreign minister and chief trade negotiator.

"So the effect on prices for consumers will be much greater than 5%, or 10, or 20 or 25%," he said.

The imposition of tariffs would also place "an enormous boulder in the road" toward ratification of the U.S. Mexico Canada Agreement, which was negotiated last year to replace the North American Free Trade Agreement.

"The right thing to do is to continue perfecting this integration, as we have been doing, renegotiating Nafta, which had good effects but 25 years later was pretty old, lacking in many things," he said. "And we came up with a very good agreement, one that President Trump himself has very much celebrated."


(END) Dow Jones Newswires

June 03, 2019 11:57 ET (15:57 GMT)

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