Predictably, the details around Donald Trump’s decision to slap Mexico with tariffs in retaliation for the country’s purportedly lackluster response to migrant flows have been leaked to the press.
As US stocks careened lower on Friday, reports indicated that both Bob Lighthizer and Steve Mnuchin opposed the decision. Mnuchin isn’t a trade hardliner and has clashed repeatedly with Peter Navarro during negotiations with China, so nobody was surprised to discover that Steve wasn’t on board with the idea of using tariffs to advance the administration’s immigration agenda.
Lighthizer’s opposition isn’t surprising either, but his reservations stem from the fact that hitting Mexico with across-the-board tariffs jeopardizes the ratification of the USMCA. Indeed, it seems entirely reasonable to suggest that markets have not even begun to price in a scenario where the deal falls apart, which it almost invariably will in the event the immigration dispute lasts until October and Trump does in fact get all the way to 25% with the levies on Mexico.
Additionally, the decision only adds to concerns among Democrats that the administration doesn’t understand how to negotiate a trade deal and then get it successfully though Congress.
As it turns out, Stephen Miller was at least partially responsible for convincing Trump to go ahead with the tariffs, which the president will likely try to say are his way of getting Mexico to pay for the wall. On Friday afternoon, we talked at length about Miller’s growing sway over Trump and how the Mexico tariffs may well be an extension of Stephen’s recent purge of Homeland Security.
On Saturday, the New York Times revealed more details around the situation.
In addition to Lighthizer and Mnuchin, Jared Kushner was also against the tariffs. He too was ignored in favor of Miller, who was apparently able to parlay Trump’s irritation with Robert Mueller’s public statement about the Russia probe into a personal triumph on the immigration front.
“This week, as headlines about Mr. Trump’s attempts to interfere in the special counsel’s Russia investigation once again swirled, the president’s irritation boiled over”, the Times writes, before giving America the play-by-play as follows:
In a meeting Wednesday night in the Oval Office, with Mr. Kushner dialing in from the Middle East, the president lost patience with aides he saw as slow-walking his request and decided tariffs would be going into effect.
The idea of punishing Mexico with tariffs had several key proponents, including Stephen Miller, Mr. Trump’s chief policy adviser and an immigration hard-liner. Pat Cipollone, the White House counsel, and Peter Navarro, a trade adviser, had also argued that emergency powers gave the president broad authority to impose the tariffs.
“I want to do this,” Mr. Trump would say when aides raised concerns.
The Times goes on to reiterate that Lighthizer’s objections centered around the risk to the USMCA, while Mnuchin fretted about the impact on markets and what message the move would send to China.
That latter point about the read-through for the standoff with the Chinese is critical. As we put on Friday morning, it’s entirely likely that Beijing will view the Mexico escalation as more evidence to support the contention that the Trump administration always negotiates in bad faith. Xi will also view it as proof that even if China were to strike a deal, Trump would find an excuse to break it so he can slap the country with still more tariffs.
It’s important to note that the idea of hitting Mexico with tariffs in order to force the country to implement a draconian crackdown on migrant flows isn’t new. Trump teased it during the first week of April.
Read the backstory
In their piece, the Times also suggests lawmakers were caught completely off guard, despite conflicting reports about whether and to what extent Congress was briefed. “According to congressional aides, most lawmakers found out about the policy after Mr. Trump’s tweet”, the article reads.
Kevin McAleenan – who, you’ll recall, became the subject of intense scrutiny in April, after reports indicated Trump may have instructed him to break the law and promised to pardon him in the event he was prosecuted – was in Guatemala when he heard about the decision on Thursday morning. As of 2 PM Thursday, nobody knew whether Trump would ultimately pull the trigger and it was Mnuchin who convinced the president to at least give Mexico until June 10 to respond. Around the same time, The Washington Post leaked the plan and Trump made it official shortly thereafter on Twitter.
In the wake of the decision, Kushner is reportedly working behind the scenes to try and reassure Mexico, but his father-in-law isn’t helping. “[Mexico] took many of our companies & jobs, the foolish Pols let it happen, and now they will come back unless Mexico stops the travesty that is taking place in allowing millions of people to easily meander through their country and INVADE the US”, the president shrieked on Saturday. He went on to pose a question:
Are the Drug Lords, Cartels & Coyotes really running Mexico? We will soon find out!
It’s not clear what’s more unfortunate – the fact that Mexico is a narco state or the fact that Trump, by his own accidental admission on Saturday, doesn’t know it.
You might well argue that the influence of the cartels in Mexico makes Trump’s case for him and you wouldn’t be entirely wrong. The problem, though, is that the drug business isn’t very lucrative for the dealers if there’s no demand for the products they’re selling. This isn’t just a supply problem and Mexico can’t do anything to help reduce Americans’ demand for narcotics – that’s up to the US. As far as illegal immigration goes, the problem has clearly worsened under Trump and to suggest his policies aren’t at least partially responsible for that, you have to be either obtuse, ignorant or some combination of the two.
One particularly worrisome aspect of this situation is that in a worst-case scenario where Trump imposes tariffs on the remainder of Chinese imports and also takes things all the way with Mexico, “roughly 80% of some US imported products [would be] subjected to tariffs, including toys, cell phones, and other consumer electronics”, according to Goldman.
“If tariffs on imports from Mexico as well as tariffs on List 4 imports from China are imposed, then a significant majority of US imports of some products would be subject to additional tariffs, such as computers and equipment (79%), TVs (84%) and personal electronics (79%)”, the bank wrote Friday.
Bank of America is slightly concerned as well. “The tariffs are adding up”, the bank wrote, in one of several related notes out Friday. “Taking a step back, it is looking like a real trade war”, Michelle Meyer said.
Yes, Michelle, it surely is. And the president is surely proud of it.
“When you are the ‘Piggy Bank’ Nation that foreign countries have been robbing and deceiving for years, the word TARIFF is a beautiful word indeed!”, Trump exclaimed on Saturday, in a separate tweet. He continued:
Others must treat the United States fairly and with respect – We are no longer the “fools” of the past!
That’s correct. We are now the “fools” of the present, and we’ll be the fools of the future too if Congress doesn’t rein in Trump’s ability to turn his obsession with protectionism into policy with a couple of tweets.