Insisting “I don’t play games,” President Donald Trump has backed down on a threat made just a week ago to shut the U.S.-Mexican border, the former businessman now giving the ally a “1-year warning” to either stop illegal immigration and drug shipments or face the prospect of new automotive tariffs.
The original threat, which could have led to a major hit to the U.S. economy and a virtual shutdown of American automotive manufacturing, generated an intense pushback, even normally supportive Republicans like Senate Majority Leader Mitch McConnell demanding the president find an alternative solution.
“If the drugs don’t stop or largely stop, we’re gonna put tariffs on Mexico and products, in particular cars,” Trump told reporters at the White House on Thursday. “The whole ballgame is cars. If they don’t do it, we’re gonna tax the cars. And if that doesn’t work, we’re gonna close the borders.”
Mexico, in a variety of forms, has been a target for Trump since he began his White House campaign. During his candidacy he frequently attacked automakers, Ford in particular, for importing cars from south of the border, and he made building a wall designed to reduce illegal movement across that border one of his signature issues.
(Auto industry frets as Trump threatens to close border. Click Here for the story.)
After failing to win Congressional support for the full funding for a border wall and legal challenges mounting to his emergency declaration aimed at finding the necessary dollars, Trump has shifted his approach to the issues of illegal immigration and drugs.
Last Friday the president tweeted, “If Mexico doesn’t immediately stop ALL illegal immigration coming into the United States through our Southern Border, I will be CLOSING the Border, or large sections of the Border, next week.”
But any shutdown is now, apparently, at least a year away, those in the White House arguing against a shutdown winning the argument, at least temporarily. They had strong backing, including from key Republicans on Capitol Hill, and plenty from the automotive community which sources 38% of foreign-made car parts from the southern neighbor.
That came to $59.4 billion worth of Mexican-made auto parts last year. At the same time, American automakers and auto parts manufacturers send $32.5 billion worth of parts and vehicles heading south of the border. All told, that works out to an average of about $250 million worth of automotive goods every single day.
Virtually every vehicle built in the United States, whether by domestic automakers like Ford and General Motors, or foreign-owned companies such as BMW and Hyundai, participate in this trade flow. And many of the Mexican-made parts are critical. These include the wiring harnesses used on 70% of American-made vehicles.
“It would be a major disruption,” especially if a border shutdown were to last more than a couple days, said David Cole, director-emeritus of the Center for Automotive Research.
(Click Here for more about suppliers, dealers expressing concern about stability of the industry.)
The president did not define precisely define what he means by demanding Mexico “stop or largely stop” illegal immigrations and drug shipments. Some experts contend that, by at least one measure, things have already improved dramatically. The number of illegal immigrants apprehended at the Mexican border has plunged about four-fold since the year 2000, from more than 1.6 million to barely 400,000 in 2018. The number actually fell to its lowest point since 1971 during Trump’s first year in office but rose slightly last year.
On Thursday, during the inaugural meeting of the White House Opportunity and Revitalization Council, Trump said, “A lot of good things are happening with Mexico.” But he also said that things haven’t gone far enough. Implementing new tariffs would be “a very powerful incentive” to get that country to act more aggressively.
Mexico has grown from an automotive backwater to become one of the world’s top auto-producing nations, in a league that also includes the U.S., China, Japan, Germany and South Korea. But the U.S. is by no means its only market. Due to the vast array of free trade agreements it has negotiated, the bulk of its assembled vehicles and car parts are shipped to markets worldwide.
Meanwhile, the U.S. is highly dependent upon Mexican car parts, as well as imported vehicles. Though Trump has tried to nudge automakers to return parts production to the States, labor costs and other factors mean that many goods, including those wiring harnesses, would continue to be imported, whether from Mexico or elsewhere.
Automakers have declined to comment on the latest presidential threats but Matt Blunt, president of the trade group, the American Automotive Policy Council denounced the idea of restricting the free trade flow with Mexico earlier this week.
“Any action that stops commerce at the border would be harmful to the U.S. economy, and in particular, the auto industry. Access to Mexico’s market place and North American integration are critical to operations in the U.S.,” Blunt said in a statement.
(Trump administration takes credit for fuel economy, emissions improvement. Click Here for the story.)
Automakers are facing a number of other trade issues initiated or being studied by Trump, including tariffs now in place on imported aluminum and steel, as well as the possibility the president may soon enact tariffs of up to 25% on vehicles and car parts imported from Europe and other parts of the world.