President Donald Trump has backed off a plan for punishing new trade taxes on Mexico that would have gone into effect today.
Trump announced that the tariffs were “indefinitely suspended” after Mexico agreed to put more resources into slowing the flow of migrant caravans from Central America that are overwhelming both countries’ southern borders.
Trump heralded the announcement in a tweet, stating “There is now going to be great cooperation between Mexico & the USA, something that didn’t exist for decades.”
Mexico President Andrés Manuel López Obrador told a crowd at a rally in Tijuana that his government, too, was celebrating. Now, it didn’t have to impose retaliatory tariffs on America.
Industry, consumers win
The news was heralded as a win for American businesses and consumers, who would have seen costs rise on fruits and vegetables, automobiles, electronics and other goods, industry and consumer groups said.
“Raising taxes on Americans and harming U.S. manufacturers and farmers will do nothing to address the crisis at the border,” the U.S. Chamber of Commerce, the largest business advocacy group in the world, warned in a statement. “If a deal can’t be reached, they will be particularly harmful to small businesses.”
Avocado prices safe for now
Under Trump’s plan, all goods from Mexico would have been penalized with 5 percent tariffs, starting June 10. They would have then gone up 5 percent a month until they reached 25 percent.
Mexico reacted quickly to avert a trade war, agreeing to deploy up to 6,000 more National Guard troops to border areas. Mexico also has agreed to shelter asylum-seeking migrants while they are waiting for America to adjudicate their claims.
That was enough to appease the White House, for now.
Great relief for businesses and consumers
Industry and consumer groups were elated to hear the news. Another round of tariffs as high as high as 25 percent would have been a blow to the American economy, they said.
A 5 percent tariff would cost American businesses and consumers approximately $17 billion in new taxes, and a 25 percent tax bill on importers would rise to $86 billion, the U.S. Chamber calculated.
The Fresh Produce Association of the Americas stated that Americans would have paid $3 billion in new food taxes if the trade tax was raised 25 percent.
Walmart also issued statements that it would do its best to hold down prices of products like avocados and tomatoes, but could not make any guarantees if new tariffs come.
In Arizona, an analysis prepared for the Arizona Chamber of Commerce and Industry, notes a 5 percent tariff increment would equal 6,000 job losses. At 25 percent taxes, the cost to Arizonans would be approximately $300 per person per year. A total of 30,000 jobs would be lost.
More importantly, with the prospect of a new tariff battle suspended, the road is less bumpy for ratification of a modernized free trade agreement to replace NAFTA, called the United States Mexico Canada Agreement (USMCA).
Both countries overwhelmed by migrant caravans
Meanwhile, both countries are overwhelmed with the crush of illegal migrants crossing Mexico’s borders in their trek north to seek asylum in America.
Most migrants are trying to escape extreme poverty and political disarray in their home countries, and there is a belief that they can get a new life in America, legally or illegally, pushing more families and individuals north in numbers never seen before.
In May, a record high of 132,000 migrants arrived at America’s southern border seeking asylum. If the trend continues, more than a million could seek asylum this year. Meanwhile, America’s immigration courts have 900,000 backlogged cases.