We had a small one a few years ago.
Tensions are now running high between Washington and Mexico City, spurred in large part by US President Trump’s insistence that he will build a ridiculous wall on the border and his even more ridiculous assertion that Mexico will pay for it. To pay for it, the President’s spokesman floated the idea of a 20 percent tariff on imports from Mexico. That would, of course, hurt Mexican exporters; but it would hurt US consumers equally, probably more. He quickly walked that idea back, and said he was just “spit-balling.” But the risk of a trade war with Mexico seems higher than ever.
There are lots of ways a trade war would be self-destructive to the USA. But, specifically which industries and businesses would be hurt isn’t clear. Obviously, any US consumer or business that uses imports will pay higher prices if tariffs are increased (I’ll really miss my guacamole). But US exporters will be hurt by the inevitable retaliation. Turns out, we have some insight into what exports Mexico might try to hurt. In 2009, Mexico imposed retaliatory tariffs on nearly 100 US exports because the US was reneging on a part of NAFTA to permit Mexican trucks to operate in the USA. The dispute was resolved after a couple years. But here’s the US exports that Mexico hit:
- Apples, pears, quinces, oranges, grapefruit, cherries, and grapes
- Pork and pork products
- Christmas trees
- Ketchup and other sauces
- Soda pop, juices, mineral waters
- Refrigerators and washing machines
- Chewing gum
These products got hit with tariffs of 20 percent or more. Dozens of other exports got hit with lower level tariffs. In general, US agriculture export bore the brunt of the tariffs.
Why? Well, when Mexico (or any country) designs their retaliation, they’re trying to create as much economic and political pain as possible. Mexico said they aimed the retaliation at states with politicians who were opposing Mexican trucks. At the same time, they are trying to avoid as much damage as possible to their own businesses and consumers. It’s complicated, but it’s meant to have a political effect.
This was in 2009. The Democrats were in charge of Congress. So a new trade war will probably look different. And given the new rhetoric, a new trade war seems likely to be a lot bigger and more damaging. But you might see some hints of who would be targeted by Mexico in their 2009 list. It won’t be fun. As Senator Lindsay Graham said, “mucho sad.”
Simply put, any policy proposal which drives up costs of Corona, tequila, or margaritas is a big-time bad idea. Mucho Sad. (2)
— Lindsey Graham (@LindseyGrahamSC) January 26, 2017
Special thanks to Kim Elliot for pointing me to this. Did I mention that Kim is coming out with a book soon on US agricultural policy and effects on poor people in developing countries? Look for it soon.