When Donald Trump announced his long-shot bid to become president of the United States in June 2015, he repeatedly attacked a longtime U.S. ally: Mexico. Our southern neighbor was sending us “people that have lots of problems,” Trump said. “They’re bringing drugs. They’re bringing crime. They’re rapists.” Mexico was also killing the U.S. at the trade game, Trump alleged, taking hard-working Americans for a ride. “They’re laughing at us, at our stupidity. And now they’re beating us economically,” Trump said. “They are not our friend, believe me.”
Mexico-bashing became a centerpiece of Trump’s campaign, and now that he is a day from taking the oath of office, his tone has changed little. Since being elected, he has threatened to reverse NAFTA policies by imposing a “big border tax” on companies that move jobs to Mexico and want to sell their goods in the U.S. He has claimed credit for convincing the Ford Motor Company to cancel plans to build a $1.6 billion plant in San Luis Potosí. And, of course, he has repeated his signature campaign promise to build a border wall and get the Mexican government to pay for it.
In Mexico, the peso has plummeted to historic lows since Trump’s election, and President Enrique Peña Nieto has been scrambling to respond to the incoming administration, vowing to protect Mexico’s dignity while also opening the door to negotiation on “all the issues that define our bilateral relationship.” To better understand what Trump’s proposals might mean for not only Mexico but also Texas, we spoke with Antonio Garza, U.S. ambassador to Mexico from 2002 to 2009, counsel in the Mexico City office of the law firm White & Case, and a Brownsville native.
Eric Benson: The morning after Trump was elected, what was the reaction of people you know in the Mexican government and the Mexican business community?
Antonio Garza: I don’t want to allude to the Kübler-Ross five stages of grief, but first it was surprise, then it was this sense of OK, that was a campaign, maybe what the president-elect intended was just to open discussions on renegotiation of NAFTA. But that more clear eyed sort of wait-and-see has moved into wait-and-pray. You’ve seen volatility around the peso. You’ve seen the Mexican central bank reacting with interest rate hikes. And you’ve seen the president-elect taking very direct aim at Mexico, making announcements about keeping jobs at Carrier and Ford in the U.S. But until there’s a clearer sense of where the administration will plant their rudder on trade and the like, I think there’s mostly going to be a lot of uneasiness.
EB: What do the Mexican leaders you know see as the best-case scenario for a Trump administration?
AG: With all this political uncertainty, certainly Mexico’s peso has taken a beating, but markets are generally responding pretty well to the notion that this may be a year of tax cuts and infrastructure spending and less regulation. There are those that suggest that with that engine in the U.S., this might actually be good for Mexico, even with discussions that would go on about the future terms of NAFTA.
EB: And what about the worst-case scenario?
AG: The other extreme? Border walls, mass deportations, tearing up NAFTA, Mexico going into a deep recession. What can I add to the litany?
EG: Since the election, Mexican President Enrique Peña Nieto seems like he keeps shifting his tone toward Trump. Sometimes he’s defiant talking about Mexico’s dignity and his refusal to pay for a wall. Then he turns around and does things like appoint Luis Videgaray, a Trump ally whom the president-elect has called a “wonderful man,” as his foreign minister. Is Peña Nieto spoiling for a fight, or trying to make peace?
AB: Have you ever seen Butch Cassidy and the Sundance Kid? You remember that point when they’re behind a rock, and one of them says, We could fight, or we could give up and go to jail? And the other says, Well, we could wait for them to surrender, but I wouldn’t count on that. That’s kind of where the Mexican government is. One day it’s, Let’s shoot it out! Then it’s, We could give up, but we’re probably not going to do that either, our national pride and sovereignty is at stake. And then it’s, We could wait for them to surrender, but that’s not going to happen. I think perhaps they have fallen into the trap of reacting daily, instead of letting this transition play out. That doesn’t mean they shouldn’t be putting their strategic pieces in play now or getting a sense of how they’re going to react, but that Peña Nieto should be trying to react so publicly, I don’t know that that necessarily serves him well.
EB: If Peña Nieto were to fight back against something like Trump’s proposed “border tax,” which would penalize businesses from moving jobs to Mexico, how would he do it?
AG: Trade is not a one-way street, and the relationship between the U.S. and Mexico is not that asymmetric. Mexico is the second largest export market to the United States. And the Mexican Constitution gives their president power to impose higher import duties and prohibit the importation of certain goods, so that could potentially put at risk significant amounts of trade coming south. Mexico imports $2 billion a year in corn alone from the U.S. And if you take on its face that six million jobs are supported by trade with Mexico that means a lot of people are working at producing exports. You have to imagine that Mexico knows very clearly what they’re importing and very clearly what the impact is of those imports.
I don’t think anybody benefits from a trade war, but ultimately the big losers would be consumers. You don’t think that companies are going to pass along the costs of Trump’s tariffs immediately? I’ll put this tongue-in-cheekily: Can you imagine a Super Bowl without avocados? U.S consumers might expect to pay lots more for guacamole come Super Sunday.
EB: Some commentators have speculated that Trump’s win makes it more likely that Andrés Manuel López Obrador, the left-wing populist former mayor of Mexico City, will win the Mexican president election in 2018. Why would Trump’s election help someone on the left? In Europe, at least, Trump’s rise has been seen as a harbinger of right-wing ascendency?
AG: I know we’re talking now about the politicians on the right, but in Mexico, the candidate of the left is well organized, he has a party that has shown some ability to win regionally, and he’s very strong in Mexico City. This all has less to do with left vs. right and more to do with populism and who you’d be a natural foil to. López Obrador would rhetorically benefit from a foil like President Trump.
EB: And he already came close to winning the presidency in 2006.
AG: Yeah. And he was on the street afterwards protesting for I don’t know how many days right in front of the embassy, so I remember it pretty well.
EB: You talked about the importance of trade with Mexico for people like Iowa corn farmers, what about for Texans?
AG: Look, you’re talking to a Texan, and I’ve always thought Texas was unique and stood head and shoulders above any other state in terms of its appreciation for trade, the border, and what that relationship meant. It’s something where we have historically provided more leadership, and I think this is a time for Texas business and political leadership to really step up and make the case for trade and make the case for this being good for the United States and this being good for Texas.
EB: Do you think Texas leaders will do that?
AG: I sure hope so.
EB: Will Trump get Mexico to pay for the wall?
EB: Is that because there won’t be a wall?
AG: Well, look, you’ve been down on the border, haven’t you? I grew up in Brownsville, and I’ve seen physical obstacles since I can remember. There have been fences and stretches of walls. And perhaps there are places where, under Trump, you’ll see reinforcements. It’ll go a little higher, a little wider. What concerns me is when you start talking about taxing remittances. In many cases, these are some of the most vulnerable people in our society sending money to relatives so those people can stay in Mexico. And now you’re talking about taxing them on dollars that have already been taxed somewhere along the way? That’s the kind of thing that doesn’t make sense to me from a purely equitable standpoint.
EB: Do you worry about some of his other proposals from that standpoint?
AG: It’s very likely that on the first day of the administration, the president will undo the DREAMer executive action, and I think that can be very disruptive and start to tear apart families as well. You can understand why there’s not only the economic uncertainty about his administration, but a very real kind of human anxiety.