On this episode, the Trade Guys unpack President Trump’s latest tariff threat against Mexico. Plus, CSIS’s very own Europe expert Heather Conley joins the show to breakdown the European Parliament election results, the turmoil political in the United Kingdom, and what it all means for the United States.
What We’re Reading
“Trump Says U.S. Will Hit Mexico With 5% Tariffs on All Goods”
“President Trump said Thursday that he would impose a 5 percent tariff on all imported goods from Mexico beginning June 10, a tax that would ‘gradually increase’ until the flow of undocumented immigrants across the border stopped.”
“The announcement, which Mr. Trump made on his Twitter feed, said the tariffs would be in place ‘until such time as illegal migrants coming through Mexico, and into our Country, STOP.’”
“In a presidential statement that followed, he said that tariffs would be raised to 10 percent on July 1 ‘if the crisis persists,’ and then by an additional 5 percent each month for three months. They would remain at 25 percent until Mexico acted, he said.”
Why it matters: The structure of the tariffs on Mexico is striking for three reasons: all goods will be covered, the duties will increase every month, and it is not clear what actions from Mexico would satisfy the administration to the point where the tariffs would be removed.
Key questions: How will Mexico react to the tariffs? Are there any actions Mexico can take on immigration that could immediately satisfy the president? Is Mexico more likely to retaliate than acquiesce to the president?
“Mexico president tells Donald Trump: ‘America First is a fallacy’ in response to tariff threat”
“The president of Mexico says he wants to avoid a confrontation with the United States, but had harsh words about President Donald Trump’s plan to impose tariffs on Mexican goods to pressure the nation to stem the flow of Central American migrants.”
“’America First is a fallacy,’ President Andrés Manuel López Obrador, often referred to as AMLO, said in a public letter released late Thursday.”
“López Obrador also announced he was sending his foreign minister to Washington, D.C., on Friday to negotiate with U.S. officials ahead of a June 10 deadline set by Trump.”
Why it matters: Mexico’s president, AMLO, appeared to strike a balanced tone in a letter sent to President Trump following the tariff announcement. AMLO has not announced retaliation but clearly disagreed with the President Trump’s tariff announcement. How negotiations ahead of the June 10 deadline shakeout will be the next milestone to watch.
Key questions: Why did AMLO opt for a measured response as opposed to a more confrontational stance which could have included a threat of retaliation? Do the two countries have enough time to hash out a deal to head off the tariffs? Does Mexico have any leverage in these negotiations?
“GOP senators warn Trump’s Mexico tariffs could blow up trade deal”
“Republicans are warning President Donald Trump that he could sabotage his hopes of a new trade agreement with Canada and Mexico if he follows through on plans to impose harsh new tariffs on the latter country.”
“’The [U.S.-Mexico-Canada Agreement] would provide much-needed certainty to our agriculture community, at a time when they need it,’ Sen. Joni Ernst (R-Iowa) said in a statement Friday. ‘If the president goes through with this, I’m afraid progress to get this trade agreement across the finish line will be stifled.’”
“She joined Senate Finance Chairman Chuck Grassley (R-Iowa) and a number of business groups who criticized Trump’s latest tariff move and warned it could imperil approval of the replacement for NAFTA, the president’s top legislative priority.”
Why it matters: The top Senate Republican on trade policy and other members of his party have explicitly warned the president that imposing tariffs on Mexico in a bid to improve border security would upset chances of USMCA passing and would run counter to congressional intent in delegating tariff power to the president. This isn’t the first time that members of Congress have grumbled about President Trump’s use of tariffs and if history is any guide it’s not clear they can muster the political will to stand up to the president.
Key questions: Statements are one thing and action is another – what can members of Congress do in response to the tariffs and what are they likely to do? Do the tariffs put USMCA in jeopardy or are Senate Republicans bluffing?
“European Elections Deepen Divisions in National Capitals”
“The outcome of the weekend’s European Union elections threatened a fresh stage of political instability in the bloc, with results in many countries signaling disillusion with the establishment and polarization among voters.”
“Britons delivered stunning blows to the U.K.’s two main political parties, coalition governments in Italy and Germany faced deepening strains and other countries called early elections.”
“As final results trickled in Monday, there was relief in the EU’s capital, Brussels, that the vote didn’t yield a broad anti-EU nationalist surge. Green parties performed particularly strongly and pro-European lawmakers are set to form a clear majority in the new European Parliament, which sits on July 2. Turnout was bigger than expected at 50.82%, a 20-year high.”
Why it matters: While the election results can be spun in almost direction, one thing that is clear is that European politics are fractured. Even though left-leaning and pro-EU parties hold a majority in the EU Parliament following last week’s election, not all is well in Brussels or the EU member countries. Right-wing, populist, and euro-skeptic parties had mixed results in individual member states but managed to add seats overall in Brussels, signaling that the euro-skeptic movement has real staying power.
Key questions: How fractured is Europe after the election? What does political fragmentation mean for the EU’s ability to work through Brexit, reach a trade deal with the United States, and calibrate its approach to China? What were some notable results at the country level and what can we draw from those results about the political state of Europe?
“Nigel Farage’s Populist Brexit Party Wins Big in European Parliament Elections”
“Britain’s new populist Brexit Party was on course to win the country’s European Parliament elections, according to early results released on Sunday, further roiling the already turbulent politics of a country polarized over its failed effort to leave the European Union.
“Led by Nigel Farage, the Brexit Party’s strong performance humiliated the governing Conservatives, whose leader, Prime Minister Theresa May, on Friday announced her resignation after almost three troubled years in power.”
“The results in Britain were a striking success for a party that has existed for only a few weeks, and for Mr. Farage, the campaigner for British withdrawal from the European Union. He is one of the country’s most divisive politicians but also one of its most effective communicators.”
“The elections also looked set to deal a crushing blow to the opposition Labour Party as it lost votes to two center-left opponents, the Liberal Democrats and Greens, which both took a clearer position against Brexit and supported a second referendum on the issue.”
Why it matters: As usual with Brexit, this latest event brought little clarity to the path forward. The strong performance of the Brexit Party could be read as British citizens reaffirming their decision to exit the EU and desire to do so quickly. On the other hand, pro-Brexit parties won less than 50 percent of the overall British vote, and the anti-Brexit Liberal Democrats and Greens picked up seats.
Key questions: What do these results mean for Brexit negotiations? What do the results signal about domestic UK politics and the future of leadership in the Parliament? Is the success of the Brexit Party surprising?