Trump Pours Cold Water on AMLO's ‘Peace & Love’ Policy With U.S.

(Bloomberg) -- Mexico’s President Andres Manuel Lopez Obrador has done everything by the book to avoid confronting Donald Trump. The U.S. president’s new threat of tariffs throws that policy into question.

In his daily press conference Friday morning, as well as in last night’s two-page letter to Trump, Lopez Obrador maintained the strategy he has followed in his first six months in power: He spoke about the need to avoid confrontation, deepen dialogue and find a long-term solution to the problem of migration with the U.S.

“We want good relations. We want dialogue and an agreement without legal actions. We won’t discard them but prefer to seek a convenient solution for both countries,” AMLO, as the Mexican president is known, told reporters at a packed National Palace room in downtown Mexico City. "We’re going to wait for the situation to evolve.”

The problem is that approach faces clear limitations with an increasingly belligerent neighbor to the north. Mexico sends near 80% of its exports to the U.S. and even a 5% tariff on all its goods as Trump is proposing would have destructive consequences on an already weakening economy.

Latin America’s second-largest economy contracted 0.2% in the first quarter and its central bank on Wednesday opened the door to the possibility it will expand less than 1% this year. The peso, which Lopez Obrador often cites as a sign of his good performance in office, plunged the most in seven months.

"It would be naive to think that Trump will not continue threatening bilateral trade and bilateral relations, as he gets closer to his re-election campaign," said Alejandro Schtulmann, who heads Mexico City-based consultancy Empra. Mexico will "drastically need to increase funding for immigration authorities and detention centers."

So far, AMLO is staying on course, saying at Friday’s press conference that he won’t change his migration policy. In recent weeks, Mexico focused on boosting detentions of Central American migrants passing through the country as a way to placate the White House -- but clearly that wasn’t enough for Trump.

After the initial shock, Lopez Obrador is sending a delegation headed by his Foreign Affairs Minister Marcelo Ebrard to Washington in the hope of obtaining a negotiated solution that would avoid the tariff. This is, again, what AMLO has been doing in the past months: he repeatedly said he won’t get into a fight with Trump over his threats to shut the border because he wants to maintain good relations with the U.S. government, at some point even suggesting it should all be “peace and love" between both countries.

The big question now is how long Mexico can continue with a policy of no confrontation.

Jesus Seade, Mexico’s undersecretary of foreign relations for North America, offered some clues about the strategy when talking to reporters in Mexico City last night.

"I’m not saying we’ll sit on our hands and do nothing until June 10 to see if it’s real or not, but I trust that it’s not something that will be put into action because it would be very serious," he said at an event. "If it happens, in my opinion we need to respond in a strong way."

--With assistance from Eric Martin, Dale Quinn, Justin Villamil and Cyntia Barrera Diaz.

To contact the reporter on this story: Nacha Cattan in Mexico City at ncattan@bloomberg.net

To contact the editors responsible for this story: Juan Pablo Spinetto at jspinetto@bloomberg.net, Robert Jameson, Walter Brandimarte

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