The US will impose a 5pc tariff on "all goods" from Mexico starting on 10 June and ratchet the duties up to 25pc by October unless Mexico reduces substantially the number of migrants crossing into the US illegally, President Donald Trump said yesterday.
The decision would impose tariffs on energy imports that last year were worth $13bn, included 665,000 b/d of crude and 53,500 b/d of products, according to government data. Trump announced the tariffs last night on Twitter, shifting his longstanding complaints over illegal immigration into a new trade dispute with Mexico that would slap tariffs on imports that reached $346.5bn in 2018.
Trump warned that if Mexico fails to take action to "dramatically reduce or eliminate" illegal border crossings by immigrants, he will raise the tariff to 10pc on 1 July, 15pc on 1 August and a final rate of 25pc on 1 October. The levies would be imposed using the 1977 International Emergency Economic Powers Act, which grants the president broad powers to regulate commerce after declaring a national emergency.
If Mexico retaliates, it could impose countervailing duties on US goods exports that reached $265bn last year, including $34bn of crude and petroleum products and $18bn worth of plastics. US exports of crude and products to Mexico last year averaged 1.2mn b/d, while natural gas exports averaged 5.7 Bcf/d through pipelines and LNG, according to US Energy Information Administration data.
Trump's tariffs could create new hurdles to ratification of the US-Mexico-Canada trade agreement, which would replace the existing North American Free Trade Agreement. Mexican president Andrés Manuel López Obrador, who before the tariffs were announced said he would call a special legislative session to ratify the trade deal, told Trump that issues with immigration would not be solved with "duties or coercive measures."
"Please, remember that I do not lack valor, that I am not a coward nor timorous but rather act according to principles," Lopez Obrador, known as AMLO, said.
Trump less than two weeks removed a 25pc duty on imported Mexican and Canadian steel. That allowed a coordinated push this week by US, Mexico and Canada to ratify the agreement. Trump's administration yesterday sent a trade deal notice to Congress, starting a 30-day clock before the White House can ask lawmakers to approve the deal.
But even before yesterday's announcement, it was unclear if Trump could garner enough support in the Democratic-controlled US House of Representatives to ratify the trade deal. US House speaker Nancy Pelosi (D-California) said the administration's decision to send the trade deal before Democrats finished work on it was "not a positive step." Pelosi wants new enforcement mechanisms that could require renegotiating the deal.
The trade agreement was expected to boost US GPD and employment but have little effect on the energy sector, aside from reducing duties on some commodity imports such as heavy oil from Canada, according to an analysis the US International Trade Commission published last month.
Trump has taken an optimistic tone on prospects for ratification. The trade deal is something that "everybody wants, I think. It is all done," Trump said on 27 May. US vice president Mike Pence yesterday said the administration would make "energetic efforts" to move the agreement through Congress this summer.
