Trump and Peña Nieto on the Phone Amid Crisis

Who pays what, how and when

By Joshua Partlow, Washigton Post

Amid one of the worst crises in U.S.-Mexico relations in years, President Trump and President Enrique Peña Nieto spoke by phone Friday morning, according to an official in the Mexican president’s office.

A White House official confirmed the conversation, saying the call took place about 9:30 a.m. Eastern time.

The call came a day after Peña Nieto canceled a planned trip to Washington, following Trump’s insistence that Mexico pay for a U.S. wall across the border. The official did not elaborate on the content of the call, which was first reported by the Associated Press.

Trump’s decision to move forward with building a border wall and his threats to dismantle the North American Free Trade Agreement (NAFTA) have opened a serious rift in the relations between the two neighbors.

Earlier Friday, Mexican business leaders and politicians warned of economic disaster and possibly unrest if trade ties between the two neighbors are disrupted by new measures proposed by the Trump administration.

Some business executives and officials in Mexico are calling for retaliatory plans.

Mexico’s economy was sluggish even before the prospect of a renegotiation of NAFTA, which has led to a large jump in commerce with its largest trading partner. The value of the peso has fallen 13 percent since the election and is plumbing historic lows against the dollar.

Economists have downgraded prospects for economic growth. A rise in gas prices that started earlier this month, part of reforms by Peña Nieto to wean the country off of gas subsidies, sparked looting, roadblocks and clashes between protesters and police. If Mexico goes into a recession, as some economists have predicted if a trade war erupts with the United States, this could lead to further violence in a country already on edge.

“We might have unrest,” former president Vicente Fox said in an interview this week. “If you have a poor Mexico, yes. If there is hunger, yes. If unemployment comes back to high levels, yes, we will have problems. And the consequences will hit right back on the United States.”

Mexico’s exporters rely heavily on the United States market. Northern Mexico has transformed in recent years into a robust manufacturing belt that produces automobiles, flat-screen televisions, and countless other products.

Major American corporations are as common as cactus in the northern Mexican deserts.

The tensions have left officials on both sides of the border calculating their next moves in a dispute that potentially puts one of the North America’s critical economic partnerships in the balance.

(Reuters)

Trump appeared to tighten the screws with a combative tweet, while Mexican politicians have rallied around Peña Nieto, who is still deeply unpopular but found himself basking in praise after calling off a meeting with Trump.

Peña Nieto made the decision after Trump suggested he should not come to Washington if Mexico remained unwilling to pay for Trump’s planned border wall.

The president of the Mexico’s national conference of governors, Gov. Graco Ramirez of Morelos, told a Mexican newspaper that Trump had declared “war” on Mexico.

“With Trump, dialogue is exhausted,” Ramirez told El Universal. “It doesn’t make sense to sit down with him. He doesn’t change his attitude or his position.”

Foreign Minister Luis Videgaray, who had flown to Washington this week in preparation for Peña Nieto’s visit, told a news conference Thursday at the Mexican Embassy that Trump had effectively impugned “the dignity of the Mexican people.” Paying for the wall, he said, was “absolutely impossible.”

“There are themes that are not part of a negotiation strategy and are totally unacceptable,” he said.

Trump seemed unmoved by the outcry from Mexico. On Friday, he tweeted: “Mexico has taken advantage of the U.S. for long enough. Massive trade deficits & little help on the very weak border must change, NOW!”

The growing rift between the two neighbors, who share a 2,000-mile border and half a trillion dollars in annual trade, comes amid a possible renegotiation of the North American Free Trade Agreement, which has been in place for more than two decades.

Mexican business executives and officials noted that a 20 percent tax on imports from Mexico — an idea floated Thursday by White House spokesman Sean Spicer — would make those products more expensive for American consumers. Some expressed exasperation that so much effort must be expended to convince the United States about the benefits of free trade.

“It’s paradoxical,” Juan Pablo Castañon, the president of Mexico’s Business Coordinating Council, a coalition of business groups, said in an interview. “Twenty-five years ago, the United States convinced Mexicans about free trade. Today we’re trying to convince Americans about free trade.”

Castañon said Mexico should reciprocate on any U.S. tax or tariff. If the United States negotiates with Mexico as a sovereign and respected partner, he said, then both countries can become more competitive and prosperous. If not, then “the first option is not to have NAFTA.”

On Thursday, White House press secretary Sean Spicer initially said the border barrier would be funded by a 20 percent import tax on goods from Mexico.

Spicer did not provide details of how the policy would work. Later, he appeared to backtrack, telling reporters that the tax was “one idea” to pay for the wall and that his intent was not to “roll out” a new policy. He said it could be part of a broader import tax plan backed by some House Republicans.

Critics said that if implemented, such a tax would mean that the wall’s cost ultimately would be borne by U.S. consumers.

Trump’s moves have rekindled old resentments in Mexico, a country that during its history has often felt bullied and threatened by its wealthier, more powerful neighbor. The legacy of heavy-handed U.S. behavior — which includes invasions in the 19th and 20th centuries and the seizure of significant Mexican lands — has mostly been played down by a generation of Mexican leaders who have pursued pragmatic policies and mutual economic interests with both Republican and Democratic administrations in the United States.

NAFTA has allowed trade between the neighbors to mushroom. Every day, goods valued at $1.4 billion cross the U.S.-Mexico border, and millions of jobs are linked to trade on both sides. Mexico is the world’s second-largest customer for American-made products, and 80 percent of Mexican exports — automobiles, flat-screen TVs, avocados — are sold to the United States.

Mexico’s economy secretary, Ildefonso Guajardo, said this week that Mexico is prepared to “mirror” any action by the United States to raise tariffs or impose taxes on imports. Guajardo has also said it might be necessary for Mexico to walk away from NAFTA — a once-unthinkable idea — if there was no benefit in the negotiations for his country.

“If we are going to go for something that is less than what we have, it makes no sense to stay,” he said.

Mexicans said they had trouble recalling a time when relations were this bad with the United States or when an American president appeared to be such a threat to Mexico’s core interests.