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The unprecedented effectiveness of militarization of tariffs by President Donald Trump to tackle non-trade issues is currently facing his most important tests in Mexico and China.
In the case of Mexico, it has launched the threat of new 5% tariffs on Mexican goods – to be taxed as of Monday – and a possible increase to 25% by 1 October. Objective: to compel the Mexican government to stem floods of undocumented migrants across US borders.
In the case of China, Beijing officials have become convinced that the purpose of the Trump administration is – at the very least – to change the way the autocratic capitalist regime does business. At most, they believe that Trump officials would like to slow down or stop the rise of China and perhaps change the regime itself.
A draft trade agreement, which was accepted by the Chinese in the United States before being rejected by US authorities, seems to have included a Chinese commitment to amend its legislation to limit illicit technology transfers, theft intellectual property and anti-competitive State subsidies.
No one disputes, let alone all the Mexican officials themselves, that Mexico should do more to help the United States solve the migrant problem. Last month, US officials apprehended or denied the entry of more than 144,000 people who crossed the southern border illegally, the highest number in a month or so in five years. This number has steadily increased since January, fueled by the fear of even stricter restrictions and by the desire to enter the door before closing.
Senior Mexican officials traveled to Washington last week on an emergency mission to negotiate an agreement to avoid tariffs. Before the weekend, Mexican Foreign Minister Marcelo Ebard confirmed reports that Mexico would send 6,000 soldiers from its National Guard to its southern border – a kind of physical event designed to appeal to Trump. The US authorities also said that Mexico had proposed changes to its asylum rules that would force migrants from Central America to seek asylum in the first foreign country they enter, namely Mexico.
Nor does anyone dispute how positive it would be for Trump to persuade the Chinese to repair their unfair trade practices, an effort benefiting from broad global support and bipartisan political support at home. However, the Chinese authorities have indicated that they have traced the line and that they have disclosed in an unusual way the details of the talks in support of their argument, when the US side exceeded its economic targets to demand that Beijing rewrite its laws in order to modify its state-controlled system.
So laudable that even the most ardent supporters of the Trump administration can find the president's goals in Mexico and China, the sad truth is that tariffs are at best insufficient and at worst counterproductive for non-commercial results.
Mexico could perhaps waive rising prices by Monday, and Trump suggested that there was a "good chance" of getting an agreement. Whatever Mexico agrees to, or that Trump accepts, however, it will not address the underlying problem.
Tony Wayne, former US Ambbadador to Mexico at the Atlantic Council, said this week: "The inability of Central American governments to provide for basic necessities and the security of bona fide many of their citizens, fueling migration, have root causes that will take years to resolve. "
The United States has recently reduced aid to Central America, despite their growing needs, which has inadvertently created an additional incentive to migrate. And while Mexico and the United States have agreed in principle to promote economic development in southern Mexico and Central America, they have yet to produce anything tangible.
Whatever Mexican officials can promise the Trump administration, it is not clear that they would have the capacity to do so. "Mexico's immigration and refugee management agencies are desperately short on staff, resources and overwhelmed by the growing number of Central Americans heading north," said Wayne.
The challenge is even greater in addressing China's multi-dimensional challenge by raising tariffs, even as we add other economic tools such as the recent ban on Huawei selling its 5G products in the United States.
The combination of the hard line adopted by the US authorities in the trade negotiations and the escalation of the clash around Huawei has prompted a more nationalistic and badertive response from the Chinese government, as evidenced by the visit of the President Xi Jinping in Russia this week with Vladimir Putin, scheduled last week. in this space.
Xi and Putin have left little doubt that their growing rapprochement is largely motivated by a coalition against the United States. It was also revealing that among the 30 agreements and agreements signed by the two leaders, there was an agreement for Huawei to develop a 5G network in Russia with the Russian telecommunications company MTS.
There is no doubt that the US moves against Beijing will slow Chinese growth and complicate Huawei's ability to expand its impressive hold on the global telecommunications and 5G markets.
Yet tariffs and technical sanctions can only have lasting value if they are not accompanied by discussions and how the two powers can together manage the future with a set of agreed rules allowing them be both strategic collaborators and competitors.
Trump's tariff struggles against Mexico and China are only part of what the economist on the cover this weekend called in a hot headline, "Mbad Weapons", printed alongside A fascinating illustration of a bomb whose face is directed to the earth with these stenciled words on its side: "TARIFFS, TECHNICAL BLACKLISTS, FINANCIAL ISOLATION, SANCTIONS."
Although Mexico and China tariffs are in the headlines, the United States also canceled India's preferential trade rules this week, but they continue to use sanctions to tame and punish foreign trade. Iran and Russia. deploys sanctions, working alongside about fifty other democracies, to replace the Venezuelan dictator with democracy.
US economic weapons are the most powerful in the world and 88% of world trade is still in dollars, although the share of US GDP in world GDP fell by almost half after World War II 38% in 1969 to about 24% now. This remains the case because for many years, a good part of the world has considered this arrangement in a positive way.
It remains to be seen – in Mexico, China and beyond – how much Trump will win thanks to his unique willingness to use economic weapons.
What is already clear is that friends and rivals are more interested than ever in exploring alternatives to the US-dominated system. Such a transition would take many years, would involve huge costs and would proceed in stages. However, the constant overuse of US economic power has made the unthinkable more plausible.
Frederick Kempe is a best-selling author, award-winning journalist and president and CEO of the Atlantic Council, one of the most influential think tanks in the United States on global affairs. He has worked for the Wall Street Journal for over 25 years as a foreign correspondent, deputy editor and senior editor of the European newspaper edition. His latest book – "Berlin 1961: Kennedy, Khrushchev and the Most Dangerous Place on Earth" – was a New York Times bestseller and was published in more than a dozen languages. Follow him on Twitter and sSubscribe here at inflection points, he examines every Saturday the main stories and trends of the past week.
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