Published On: Mon, Feb 27th, 2017

Mexico warns it will cut off talks on NAFTA if U.S. proposes tariffs

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Mexico’s top trade negotiator doubled down on threats to break off talks to rework Nafta, saying his country will walk away if the U.S. insists on slapping duties or quotas on any products from south of the border.

“The moment that they say, ‘We’re going to put a 20 percent tariff on cars,’ I get up from the table,” Mexican Economy Minister Ildefonso Guajardo said in an interview with Bloomberg News. “Bye-bye.”

This doesn’t mean, Guajardo emphasized, that Mexico would be looking to scrap Nafta. But by saying it refuses to even discuss the kind of tariffs President Donald Trump has long trumpeted, the country is ratcheting up the pressure on U.S. negotiators and effectively daring them to pull out of the 23-year-old pact.

(PHOTO: Bloomberg News)



Trump has lambasted the accord — which also includes Canada — as unfair and responsible for a “massive” imbalance favoring Mexico. It last year shipped $294 billion worth of goods north while the U.S. sent $231 billion south.

Mexican officials have said they expect official talks to start in June. And if they fail? “It wouldn’t be an absolute crisis,” said Guajardo, who headed the Nafta office of the Mexican embassy in the U.S. in the early 90s, when the pact was being written and implemented.

Tariff Talk

Without Nafta, trade between Mexico and the U.S. would be ruled by World Trade Organization strictures limiting tariffs either country can impose on the other, with the average for Mexico at around 3 percent, according to the Mexico City-based political-risk advisory firm Empra. That “would take away some of our margin of competitiveness,” the minister said, but would be manageable.

One thing that could help mitigate the impact is the tumble in the peso. It’s plunged 25 percent against the dollar in the past two years, swelling profit margins for exporters.

As things stand now, most products go back and forth duty free; automobiles, televisions sets and some other goods have to contain a certain amount of content sourced in North America to get full Nafta benefits. But there’s been a lot of talk in Washington about taxing imports.

White House spokesman Sean Spicer in January floated the idea of a 20 percent levy on goods from Mexico to pay for a border wall. That trial balloon went up after Mexican President Enrique Pena Nieto canceled a trip to the American capital in response to Trump’s repeating a campaign pledge about charging Mexico for the cost of building the wall.

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Source: bloomberg.com

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