Mexico Says Tariffs May Backfire as Talks With U.S. Begin

(Bloomberg) -- Mexican officials began talks to avert President Donald Trump’s proposed tariffs, arguing the move could backfire by derailing the country’s efforts to stem the flow of Central American migrants to the U.S.

Mexico has returned tens of thousands of people fleeing Honduras, Guatemala and El Salvador this year, paying for shelter, meals, transportation and medical aid, Foreign Minister Marcelo Ebrard told reporters on Monday. More than a quarter million more migrants would reach the U.S. this year from the region without Mexico’s help, he added.

The U.S. threat to impose the tariffs on all Mexican goods and possibly cancel aid programs for Central America could cause financial and economic hardship in Mexico and hurt the country’s efforts to address migration flows, he said. Mexico is willing to work with the U.S., but its ability to meet Trump’s demands is limited by the nation’s constitution, a global migration pact signed in Morocco last year and “the dignity of Mexico," Ebrard said.

Ebrard said that an idea favored by some U.S. officials to force Central American migrants seeking asylum in the U.S. to instead do so with Mexico as a "safe third country" wouldn’t be acceptable.

"We’ve been saying for a while that a ‘safe third country’ agreement wouldn’t be acceptable for Mexico," Ebrard said. "Up until now, they haven’t proposed it to me."

Ebrard arrived in Washington late Friday night and along with Mexican Ambassador Martha Barcena met with U.S. Secretary of Homeland Security Kevin McAleenan on Sunday, according to two people familiar with the conversation, who asked not to named because it hasn’t been made public. Meetings on Monday will include the Department of Agriculture, the Department of Commerce, the U.S. Trade Representative and the Department of Homeland Security, Ebrard said.

Mexican officials are emphasizing the importance of the relationship between the two nations, echoing the tone adopted by President Andres Manuel Lopez Obrador, who said on Monday morning in Mexico City that he’s optimistic a deal can be reached to avoid tariffs. Trump last week threatened to slap 5% duties on all Mexican goods on June 10 that would rise to 25% by October unless the country steps up its work to fight illegal immigration. The move roiled markets and opened a new front in Trump’s trade wars.

Investors were less optimistic. The peso slumped on Monday, falling 0.7% to 19.7618 by 1:30 p.m. in New York.

The tariff threat could derail passage of the U.S.-Mexico-Canada Agreement -- the successor to the Nafta trade deal -- just as the three nations looked set to seek ratification from their legislatures.

Republican Chuck Grassley, chairman of the Senate Finance Committee, said last week the tariffs could jeopardize the passage of USMCA, adding that trade policy and border security should remain separate issues.

©2019 Bloomberg L.P.

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