President Trump’s trade rhetoric
Donald Trump has now been sworn in as the 45th President of the US. Due to part of his campaign rhetoric on foreign policy, some members of the global community, such as Mexico, are waiting to see to what extent the status quo in U.S. – Mexico relations will be altered.
The majority of the Mexican population is already burning with anger after the sharp hike in gasoline prices. But Trump’s proposals for Mexico with regard to its trade ties, if implemented, could impact the economic well being of the working population to an equal degree.
Trump has taken a tough stance on NAFTA (North American Free Trade Agreement), which has Canada and Mexico in wait and see mode to understand potential amendments that may be introduced. On January 18, Commerce Secretary Wilbur Ross, at his Senate confirmation hearing, said that NAFTA had never been reviewed transparently. Reuters quoted him saying that “I am not anti-trade. I am pro-trade. But I am pro-sensible trade, not trade that is to the disadvantage of the American worker and to the American manufacturing community.”
Mexico’s auto industry in jeopardy
Mexico’s auto industry has been arguably most directly in the line of fire, with Trump having taken jabs at those companies which have a significant portion of their equipment and components being manufactured in Mexico and then exported to the US. Automakers, on their part, have announced plans to invest in the US by expanding capacity in the U.S rather than Mexico.
For instance, Fiat Chrysler Automobiles N.V. (FCAU) will invest $1 billion to upgrade its facilities in Ohio and Michigan and will create 2,000 jobs in the process. The company may also shift the production of a pick-up truck from Mexico to Michigan. Meanwhile, Ford (F) has decided not to build a plant worth $1.6 billion in Mexico; it will invest $700 million in its plant in Michigan.
Chance to overtake Brazil lost
When a political corruption scandal had hit Brazil (EWZ) in 2015 and intensified last year, Mexico (EWW) had seemed well placed to take the torch from Brazil and become the new leader of Latin American economies. However, the rise in gasoline prices and potential changes to US trade policy has thrown a spanner in the works.
With Brazil showing small signs of recuperating, Mexico may have just witnessed its chance at leading Latin America’s economic charge slip away, at least for 2017.