Mexican Economy Minister Ildefonso Guajardo has announced that his country will walk away from the NAFTA negotiations if the U.S. puts a tariff on products from Mexico. During the presidential campaign last year, then-candidate Donald Trump expressed support for a 35 percent tax on auto imports from Mexico. In January, White House spokesman Sean Spicer spoke vaguely about a 20 percent tariff on goods from Mexico to pay for Trump’s proposed border wall.
In an interview, Guajardo said, “The moment that they say, ‘We’re going to put a 20 percent tariff on cars,’ I get up from the table.” The assertion is in line with previous comments from Mexico against the proposed tariffs. Mexican President Enrique Pena Nieto canceled a trip to the American capital earlier this year in response to Trump’s repeated assertions that the U.S. would charge Mexico for the cost of building the wall.
Trump has said that NAFTA is responsible for a “massive” trade imbalance favoring Mexico. Under the current trade rules, most products go back and forth between the countries duty free. In the last year, Mexico shipped $294 billion worth of goods to the U.S. while the U.S. sent $231 billion in goods to Mexico.
Refusing to even discuss President Trump’s pledged tariffs puts increased pressure on U.S. negotiators seeking to find a solution. Some Republicans in Congress have called for a border-adjustment tax that would affect all countries, instead of singling out Mexico. Guajardo said a border-adjustment tax is something that’s squarely a domestic fiscal matter for the U.S. and would likely be mirrored by other nations to level the playing field.
Guajardo made it clear that Mexico isn’t looking to scrap NAFTA. Despite it all, Guajardo expressed optimism that the U.S., Mexico and Canada would be able to reach terms on revamping NAFTA. Guajardo said in his statement, “I think there is a way to find a very good agreement that will be a win-win for the three countries.” Mexican officials have said they expect official talks to start in June.
However, the end of NAFTA wouldn’t be a crisis for Mexico, according to Guajardo, who was head of the NAFTA office of the Mexican embassy in the U.S. in the early 90s. While the U.S. is Mexico’s biggest single trading partner, Mexico also has trading pacts with more than 40 other countries. Without the trade accord, trade between Mexico and the U.S. would be ruled by World Trade Organization, which would be likely to limit the tariffs that the U.S. could place on goods from Mexico.