Mexico warns U.S. of economic fallout from proposed Trump tariffs

Mexico launched a counteroffensive Monday against the threat of U.S. tariffs, warning not only that it would hurt the economies of both countries but also could cause a quarter-million more Central Americans to migrate North.

A high-level delegation from the Mexican government held a press conference at the embassy in Washington, making the case against President Donald Trump's threat to impose a five per cent tariff on Mexican imports by June 10.

Trump is in London for a long-planned overseas trip, leaving others to stem a potential trade crisis. It is unclear what more Mexico can do — and what will be enough — to satisfy the president. Trump's Republican allies warn that tariffs on Mexican imports will hit U.S. consumers and harm the economy.

The president all but taunted negotiators for a quick resolution. "Mexico is sending a big delegation to talk about the border," the president tweeted Sunday. "Problem is, they've been 'talking' for 25 years. We want action, not talk."

But Mexican Foreign Minister Marcelo Ebrard replied Monday that both countries working together is "the best way to do it."

Laying out impact of tariffs

Ebrard says his team will be delivering to U.S. officials on Monday a document detailing the impact of tariffs for both countries.

On Monday, Mexican Economy Minister Graciela Marquez plans talks with Commerce Secretary Wilbur Ross. Two days later, delegations led by Secretary of State Mike Pompeo and Foreign Relations Secretary Marcelo Ebrard will also meet in Washington.

Mexico said it will only go so far to avert the duties, and absolutely ruled out a "third safe country" agreement that would require asylum seekers to apply for refuge in Mexico first.

"There is a clear limit to what we can negotiate, and the limit is Mexican dignity," said Mexico's Ambassador to the United States, Martha Barcena.

Barcena said Mexico has taken steps to offer migrants visas in Mexico, and "without Mexico's efforts an additional quarter-million migrants could arrive at the U.S. border in 2019."

Barcena said Mexico has accepted 8,835 returned migrants as of May 29, and they are now waiting in the country for an asylum hearing in the U.S. courts.

Marquez told reporters her team is assessing potential reprisals in case the diplomatic efforts do not bear fruit this week. "We will have to make a strategic plan to take into consideration many elements," she said.

Escalating tariffs

Agriculture trade between the United States and Mexico was worth about $130 million US a day last year, according to Mexican Secretary of Agriculture Victor Villalobos. A five per cent U.S. tariff would decrease that trade by $3.8 million a day, he said.

Trump has threatened to increase the tariffs by five per cent a month if Mexico does not halt the flow of migrants, so the tariff could be 25 per cent by October.

But U.S. businesses have pointed out the country's reliance on Mexican imports.

Chipotle Mexican Grill Inc on Monday estimated a $15 million hit from the proposed tariffs and said it could cover that by raising burrito prices by around five cents.

The U.S.-based Mexican-themed chain's finance chief Jack Hartung said its margins would be reduced by 20-30 basis points if the tariffs suggested by Trump go up to 25 per cent, pushing up prices of avocados, the key ingredient in guacamole.

Economists and business groups have warned the U.S. consumer will ultimately pay the price.

Mick Mulvaney, the acting White House chief of staff, played down those fears, saying he doubts business will pass on the costs to shoppers. "American consumers will not pay for the burden of these tariffs," he said.

Mulvaney acknowledged there are no concrete benchmarks being set to assess whether the U.S. ally is stemming the migrant flow enough to satisfy the administration. "We intentionally left the declaration sort of ad hoc," he said.

What about the trade deal?

"So, there's no specific target, there's no specific percentage, but things have to get better," Mulvaney said. "They have to get dramatically better and they have to get better quickly."

The tariff threat comes just as the administration has been pushing for passage of the new NAFTA three-way trade deal and top Republicans warned it could derail that effort.

GOP Sen. John Kennedy of Louisiana, called the tariffs a "mistake" and said it was unlikely Trump would impose them.

Republicans on Capitol Hill and GOP allies in the business community have expressed serious unease with the tariffs. Some see this latest threat as a play for leverage and doubt Trump will follow through. Earlier this year Trump threated to seal the border with Mexico only to change course.

Republicans have repeatedly tried to nudge Trump away from trade wars and have specifically questioned the White House's ability to rely on executive authorities to impose some of them as national security issues.