FP’s Guide to the U.S.-Mexico Trade War

On May 30, facing a new wave of migration at the United States’ southern border, U.S. President Donald Trump lashed out at Mexico. Condemning the country’s inability to completely halt the flow of migrants—including from Central America—Trump threatened tariffs of 5 percent starting the following week, with monthly increases until the dispute was settled on his terms. The announcement was only the latest salvo in an ongoing trade war with Mexico that could leave both countries worse off.

We’ve gathered our top reads to show how the two countries got to this point—and what will come next.

Almost as soon as Trump took office in January 2017, predictions about a coming economic dispute with Mexico were rife. Dan Restrepo, a fellow at the Center for American Progress, predicted that “if Trump continues to recklessly squeeze the Mexican economy, undermine the Mexican rule of law, and fuel Mexican nationalism,” he would “unleash a full-blown national security crisis that would make the United States less prosperous and less secure.”

Trade—and the two countries’ economies—would suffer, too. And that, according to Foreign Policy’s Robbie Gramer and then-Foreign Policy reporter Emily Tamkin, would give Mexico some leverage over the United States. “Roughly 6 million jobs in the United States depend on trade with Mexico,” they wrote, not to mention the fact that “Mexico is the United States’ third-largest agricultural export market.”

Of course, the Mexican economy stood to lose as well—from its high-tech sector to the beer industry. “Mexican beer may be brewed and bottled south of the border, but the key ingredients—the hops and the barley—come mostly from the northern United States,” the journalist Jessica Holzer explained. Tariffs could complicate that process, as well as make beer, “Mexico’s No. 1 agricultural export to the United States,” more expensive.

When Trump set a timetable for renegotiating NAFTA not even a month into his presidency, fears about a coming trade war between the United States and Mexico became even more pronounced. His demands, wrote the journalist Bethany Allen-Ebrahimian, “appear to be on a collision course with Mexico, Canada, American businesses, and even a majority of Americans.”

To be sure, some free traders believed that NAFTA was due an update. “It’s just an old house that needs some work done,” Carla Hills, who served as the U.S. trade representative during the NAFTA negotiations, told David Francis, then a reporter for Foreign Policy, suggesting that the agreement could be updated for the digital age, among other things.

And in the end, that is basically what happened. Despite all the bluster, Canada, Mexico, and the United States came together around a new free trade agreement that mostly gave the old one a fresh coat of paint. In turn, Foreign Policy’s Keith Johnson reported, “it’s far from clear that the revised pact will revitalize manufacturing, or whether it’s mainly a rebranding of NAFTA—or that Congress will hand Trump the win on trade he is desperately seeking.”

And indeed, tensions over trade remained as Mexico elected a new left-wing president, Andrés Manuel López Obrador, and the U.S. Congress dragged its feet on ratifying the agreement and on granting Trump funding for the border wall that was a key plank of his election campaign. For a time, López Obrador and Trump appeared to come together over the idea of a Central American Marshall Plan, which would entail development aid (to the tune of $5.8 billion) from the United States aiming to “ease migration pressures” in the region, as the American Enterprise Institute’s Ryan C. Berg wrote.

But by this spring, U.S.-Mexican relations were heading downhill once more as new caravans of Central American migrants arrived at the U.S. border and Trump responded with the surprise 5 percent tariff. Trump’s announcement, Foreign Policy’s Johnson reports, “came the same day that the Mexican Senate began deliberating on the new United States-Mexico-Canada Agreement (USMCA), Trump’s slightly modified NAFTA that he hopes to pass this year and get ratified by all three countries.”

The latest chapter in the trade dispute comes as the campaign season for the 2020 U.S. presidential election begins. Whether Trump’s trade posturing helps him with his base, though, is more in doubt than ever. Until now, much of the U.S. economy had been protected from the larger U.S. trade war with China, Johnson writes, “in part because some imports have instead come through Mexico. But with the broadening of the trade war, things could start to get real, with potentially serious economic consequences at a time when Trump is banking on a healthy economy to offset his dismal approval rating.”