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Mexico hardens stance against Trump, warns of tariffs, says it can afford to lose U.S. aid

Reuters

An emboldened Mexico hardened its opposition to President Donald Trump on Friday by saying it will retaliate if the United States imposes a border tax and that it can afford to lose financial aid that might be pulled to pay for a border wall.

Foreign Minister Luis Videgaray said Mexico could respond to any tax the United States unilaterally imposes on imports from its southern neighbor to finance the wall with levies on selected goods, aimed at U.S. regions most dependent on exports south of the border.

“Without a doubt, we have that possibility, and what we cannot do is remain with our arms crossed,” Videgaray said in a radio interview. “The Mexican government would have to respond.”

The statements by Videgaray and Interior Minister Miguel Angel Osorio Chong, who minimized the potential impact of the rumored loss of U.S. security aid, toughened the defiant tone from Mexico since President Enrique Pena Nieto last month canceled a trip to meet Trump over the wall dispute.

Mexicans are angry at Trump’s calls for U.S. firms not to invest south of the border, insults to immigrants and threats to make Mexico finance the border wall. The peso currency has weakened on concerns he will hurt Latin America’s No. 2 economy.

Pena Nieto had faced criticism he was too accommodating with Trump but got a much needed ratings boost after canceling the summit. A plan to deport third-country nationals to Mexico fueled outrage this week.

Mexican officials were publicly blunt with U.S. Secretary of State Rex Tillerson and Homeland Security John Kelly over Trump’s immigration and trade proposals during their visit to Mexico on Thursday.

Osorio Chong told local radio that Mexican officials’ rejection of Trump’s bid to send non-Mexican illegal migrants from the United States to Mexico was “very clear.”

“They asked us if (non-Mexican illegal immigrants) could be here while they are going through the legal process there. We said that there was . . . absolutely no way.”

Videgaray said the trade strategy will replicate a 2009 campaign of retaliatory tariffs that helped Mexico win a dispute with the United States. On Wednesday, the minister mentioned Iowa, Texas and Wisconsin as states that could be targeted in a conversation with lawmakers leaked to two newspapers.

“This is not our preference,” he said. “Mexico believes in free trade.”

A U.S. executive order on Jan. 25 that mandated the construction of a border wall also required government agencies to report the financial assistance they gave Mexico in the past five years, leading to speculation Trump wants to redirect the aid to pay for its construction.

On Friday Osorio Chong said that Mexico has no need for such financial aid from the United States, signaling that it will not come close to paying for the estimated $21.6 billion cost of the wall.

Like in other middle-income emerging economies, many in Mexico consider it humiliating to take aid from wealthy countries.

A large part of U.S. aid to Mexico comes through the Plan Merida program, under which the U.S. Congress allocated $2.6 billion to security assistance between 2008 and 2016.

Of that, $1.6 billion had been disbursed by last November, according to the U.S. Congressional Research Service.

“When they realize what’s left of Merida, they will understand that it’s not even that significant,” Osorio Chong told local radio.

“We don’t object to them moving these resources . . . Mexico now has its own capabilities,” he said.

The U.S. Customs and Border Protection agency said Friday it will accept proposals next month for the design of Trump’s wall, a first step in picking vendors.

Videgaray said a meeting of Tillerson, Kelly and Pena Nieto in Mexico City was a short courtesy visit.

He said in a more substantial meeting of the ministers, Kelly told him that deportations of undocumented immigrants from the United States will not be militarized, after Trump characterized the process as a “military operation.”

Meanwhile, a senior ally of German Chancellor Angela Merkel said in a newspaper interview that Europe should impose punitive tariffs on imports from the United States if Trump acts to shield U.S. industries from foreign competitors.

“If Donald Trump imposes punitive tariffs on German and European products, then Europe should also impose punitive tariffs on U.S. products,” Volker Kauder, parliamentary floor leader of Merkel’s conservatives, told the Funke media group in an interview published Saturday.

“We cannot accept everything,” Kauder added.

He said German officials will have to remind “our friends in Washington” that trade wars in the past have already shown that both sides only lose from such measures.

“We just have to say calmly and with self-confidence: If Trump carries out what he said, then Europe must react,” Kauder said.

The German government has vowed to protect global free trade after Trump threatened protectionist measures and his top adviser on trade accused Germany of exploiting a weak euro to boost exports.

German Vice Chancellor Sigmar Gabriel has suggested that the European Union should refocus its economic policy toward Asia, should the Trump administration pursue protectionism.

In a sign of already shifting trade flows, China became Germany’s most important trading partner for the first time in 2016, overtaking the United States, which fell back to third place behind France, data Friday showed.