Wimpy Response by Obama to Mexican Trade Challenge

http://www.reuters.com/article/politicsNews/idUSTRE52F7KN20090317

As reported in the linked article, in retaliation against the  U.S. for ending a program that would have given Mexican trucks free rein on America’s highways (thanks to Congress), Mexico has slapped tariffs on American food exports. 

Mexico slapped tariffs on 90 American agricultural and manufactured exports on Monday in retaliation for Washington’s move to block Mexican trucks from using U.S. highways.

Not all U.S. food exports, though: 

But a spokesman for the Mexican economy ministry said the new tariffs would not affect rice, corn, beans or wheat, which are the main U.S. farm products exported to Mexico and make up much of the average Mexican’s diet.

Unfortunately, it appears that the response by the Obama administration to the first trade challenge of its administration is weak:

President Barack Obama‘s administration, facing its first dispute with a major trading partner and neighbor, promptly said it would work to create a new cross-border, long-distance trucking program between the two countries.

“The president has tasked the Department of Transportation to work with the U.S. trade representative and the Department of State, along with leaders in Congress and Mexican officials to propose legislation creating a new trucking project that will meet the legitimate concerns of Congress and our NAFTA commitments,” White House spokesman Robert Gibbs said.

I hope this is just a stalling tactic, but this wimpy response is really disappointing.  The proper response would have been an immediate imposition of a small tariff – about 5% –  on all Mexican manufactured goods, a tariff that would be ratcheted ever higher if there was further retaliation by Mexico.  After all, with an annual trade deficit with Mexico of about $37 billion in manufactured goods, it’s impossible for the U.S. to come out the loser in a trade war with Mexico.  It’s a perfect opportunity to demonstrate to the other parasitic economies of the world that they are in no position to dictate trade terms when they are the ones with the trade surplus.  But if the response by Obama is any indication, it’s an opportunity that will be lost.

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4 Responses to Wimpy Response by Obama to Mexican Trade Challenge

  1. […] Obama’s Wimpy Response: https://petemurphy.wordpress.com/200 9/03/17/wimpy-response-by-obama-to -mexican-trade-challenge/ […]

  2. mtnmike says:

    Pete said,

    “The proper response would have been an immediate imposition of a small tariff – about 5% – on all Mexican manufactured goods,”

    At which time Mexico would ratchet up the tariff on oil and invite the Chinese to take a firm foothold on not only their oil output but physically on Mexican soil.

    The U.S. is totally dependent on foreign oil and foreign investment just to remain treading water.

    Our situation is far more macro and grave than the re- institution of tariffs can restore. Unless there is a huge paradigm shift that involves far more than tariffs and trade, we are for all practical purposes, down for the count.

    • Pete Murphy says:

      Mike, if my tariff plan were fully implemented across the globe, as I recommended in the book, any attempt by Mexico to raise tariffs on oil would be completely impotent because the U.S. would not impose any tariffs on our other major sources of oil – Canada, Saudi Arabia, Venezuela, etc. There would be no tariff on their oil or any of their products because of their low population density. Mexico is an anomaly in this respect; very few other densely populated nations are a source of natural resources. And if Mexico concluded that free trade with China would be beneficial to them in some way, they’d be making a big mistake. If they want to try, that’s their right. I don’t see how it would be a cause of concern for us.

  3. Clyde Bollinger says:

    The obvious is that none of the densely populated countries will buy anything that they can produce. Keeping their workforce occupied is of paramount importance. China, for instance, will no more buy from Mexico that they will from the US.
    What we need to recognize is that we have the identical need, just not the will. Our workforce should be growing, but instead is shrinking. We buy junk (much of it dangerous) from China, Mexico and Korea, cars from Japan and Germany, pills from Ireland. All can be made here.
    Mexico’s oil leverage would disappear were we to start drilling a few of the known deposits of oil in this country. That is not likely to happen due to the environment considerations.
    Still the pundits yak of the need for job re-training and increased competetiveness. Bunk. What jobs are there to train for and where there is no market, there is nothing to compete for. Sooner or later reality has to sink in for these policy makers.

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