How Trump's Mexico threat imperils his own economic agenda

President Donald Trump's vow to impose new tariffs on Mexican imports risks sabotaging not just his drive to forge more favourable trade deals but also a U.S. economy that he says has strengthened under his watch.

Trump announced Thursday that he would impose a 5 per cent tax on all Mexican imports on June 10 and raise it to 25 per cent by October 1 unless Mexico stopped a surge of Central American migrants into the U.S. That would swell the prices Americans pay for countless items from avocadoes to clothes to medical devices.

His threat, which drew an outcry from a broad span of business groups and political figures, suddenly cast doubt on prospects for a new North American trade agreement.

Trump last year negotiated the deal, formally called the U.S.-Mexico-Canada Agreement, or USMCA, and billed it a triumph of his economic policymaking.

The USMCA must be approved by lawmakers in all three countries. Yet Mexico is unlikely to ratify the pact if it must cope with a new batch of Trump-imposed tariffs just months after forging a free-trade agreement with the administration. The very point of free-trade pacts, after all, is to liberate countries from tariffs and other protectionist policies that hurt their exporters.

"It's very hard to see the USMCA going forward after this," said Philip Levy, who was a White House economist under President George W. Bush and is now a senior fellow at the Chicago Council on Global Affairs.

"The president has essentially told the Mexicans that the deal offers them no guarantees against (U.S.) trade protectionism. It asks them to jump through hoops with no reward."
Sen. Chuck Grassley of Iowa, chairman of the Senate Finance Committee, denounced the president's threat as a "misuse of presidential tariff authority" that would burden American consumers and "seriously jeopardize passage of USMCA."