The Impact Of Tariffs On Mexico
SCOTT SIMON, HOST:
The White House slapped steep tariffs on steel and aluminium this week against some of America's allies, including the European Union, Canada and Mexico. This could have serious implications for Mexican-American relations, which have already been strained amid the Trump administration. We're joined now by Latin American expert Shannon O'Neil of the Council on Foreign Relations. Thanks so much for being with us.
SHANNON O'NEIL: My pleasure.
SIMON: What kind of impact could these tariffs - 25 percent on Mexican steel, we understand - have on Mexico?
O'NEIL: Well, the actual impact of these tariffs isn't going to be huge. The amount of steel that Mexico sends the United States is about $3 billion a year. But that's just a small fraction of the $300 billion that comes north to the United States in terms of overall exports. But it's really that we're changing the way that we relate to Mexico in this commercial space. And so for the last almost 25 years, Mexico, the United States and Canada have had a free trade association where there were no tariffs on goods going back and forth. So this is a change in the way that we are going to relate to what has been one of our strongest commercial partners.
SIMON: So it was a smooth relationship, and now it's not - is you're suggesting.
O'NEIL: Well, we - as we all know with NAFTA, there have been disputes here and there on various things. But the idea was - and really the reality has been - that we would settle that within the NAFTA framework and that tariffs were not part of this overall way of working together or the way of interacting with each other. And now the Trump administration looks to be changing that.
SIMON: Yeah. Is there some leverage that Mexico has in this relationship that would help them maybe sharpen the mind of the Trump administration on the cost of tariffs?
O'NEIL: Well, Mexico, on the surface - it's a much smaller economy. And it's an economy that's very dependent on the United States. Trade is a big part of their economic engine. And almost all of it comes from the United States. But interestingly, they do have some leverage. And they have been very sophisticated in using it. Almost a decade ago, in a dispute, they put some tariffs on U.S. goods. And they were very targeted in what they did. And they're doing that strategy again. So they announced yesterday, in the wake of these tariffs, that they would put retaliatory tariffs not really on steel but on things like apples and cheese and pork and cranberries and lamps, which are made primarily in Ohio and Pennsylvania - all sorts of things that are targeting particular congressional districts with high-level Republicans and with many Trump supporters.
SIMON: That's a very targeted strategy.
O'NEIL: It is, indeed.
SIMON: Is it possible that the tariffs could wind up making Mexico a more attractive place to actually produce goods?
O'NEIL: Well, it will be interesting if Mexico - if this is just a glimpse, and these get resolved, or if this is a longer-term strategy, that these stay in place and perhaps others as well. And if that happens - and I do think Mexico will start looking more broadly in the world - they have trade agreements with the EU, with Canada and with many other nations, which the United States doesn't have as broad a base. And they could actually become more competitive in making things because steel prices, aluminum prices, other things will likely rise in the United States if it's the only domestic production. And Mexico may be more competitive in those goods here and in the United States but also globally.
SIMON: Shannon O'Neil of the Council on Foreign Relations, thanks so much for being with us.
O'NEIL: Thank you.
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