In an apparent reversal on the position he so firmly stated over the weekend, President Donald Trump now says that he will not immediately shut down the U.S.-Mexico border, opting instead to wait for a year.
Although he had threatened to shut down the border this week, the president told the press at the White House on Thursday that Mexico should consider this a “one-year warning.”
While his threat to shut down the border was intended to force Mexico to stop Central American migrants from reaching the U.S. border, the president focused on drugs when he said he plans on imposing tariffs on Mexican products, “particularly cars.”
The president made the statement on the same day that Martha Bárcena, Mexico’s new ambassador to the United States, was discussing ratifying the new free trade agreement (the USCMA, signed with the United States and Mexico) with Democratic lawmakers in Washington, D.C.
His threat to close the border rang major alarm bells within his administration, with business leaders and advisers alike warning him of the dire economic consequences of shutting down the border. The U.S. Chamber of Commerce equated a border shutdown to an economic “calamity.”
The United States and Mexico do an excess of $600 billion annual trade, with automotive imports and exports (including parts and engines) constituting roughly a quarter of the trade between the two countries. But the picture is more complicated than that. Car components cross the U.S.-Mexico border about eight times in the assembly process.
Jennifer Thomas, vice president of federal government affairs at the Alliance of Automobile Manufacturers, told ThinkProgress that this new tariff would be “problematic” for a number of reasons.
First and foremost, it violates the spirit of the USMCA, she explained, adding that “ratification of the USCMA will get complicated if he continues to dangle that threat out there.”
The steel and aluminum tariffs the president imposed last year on several countries, including Mexico, remain in place and cover automotive parts, and those tariffs have not yet been removed, despite the fact that a new trade deal has been signed.
A “side letter” of agreement signed in November was meant to protect Mexico from these tariffs, essentially exempting a certain amount of Mexican automotive imports from such tariffs for 60 days in the event that new tariffs are announced under the USMCA negotiated by the Trump administration. The USCMA has not yet been ratified by lawmakers in Canada, the United States, and Mexico.
The agreement is meant to cover trade, not migration issues and drug cartels.
Aside from that, Thomas explained that the American automotive industry would be hit by a “catastrophic” domino effect: The tariffs would prompt a decline in assembly production, which would drive up costs to the consumer by thousands of dollars. The increase in prices would lower sales, which would further slow production and lead to lost jobs.
The automotive industry — supplies, manufacturers, and dealers — account for over 7 million jobs in the United States.
In this way, the auto industry is essentially being held hostage by the broader immigration debate.
The fact that the these tariffs might be in place in a year before a potential border shutdown sows “tremendous uncertainty” for the automotive industry, which thrives off predictability, Thomas said.
“We are a very capital-intensive manufacturing industry. We have very long product lead times. And this just throws the uncertainty to a new high. That just inhibits automakers from planning and being able to make investment decisions, long-term,” she said.
The president has grown increasingly agitated by the number of Central American migrants entering the United States. He has called the situation at the border an “emergency,” (an assessment with which the Pentagon has disagreed) saying that the United States is being “invaded” by dangerous people.
It’s unclear how automotive tariffs might address any kind of emergency, but in addition to threatening to close the border, Trump has also ordered for aid to be cut to their primary countries of origin — Honduras, Guatemala, and El Salvador.
Arrests at the U.S.-Mexico border have dramatically increased in recent months, as families continue to flee gang violence and poverty in their home countries.