President Donald Trump announced last week that he intends to implement tariffs on all imports from Mexico, threatening a trade war that Texas lawmakers from both parties worry would seriously damage the state’s economy. Here’s what that means for Texas.
First, what is Trump proposing, exactly?
Trump announced his intentions in a vague tweet last week, then followed up with a statement that included more specific details. The plan calls for a 5 percent tariff on all goods imported from Mexico, starting June 10, with incremental increases of 5 percent each month up to 25 percent if Mexico doesn’t take some sort of action to curtail undocumented immigration from Mexico into the United States.
Trump has said the tariffs would be called off “if the illegal migration crisis is alleviated through effective actions taken by Mexico, to be determined in our sole discretion and judgment.” It’s anyone’s guess what an “alleviated” level of immigration would look like, or what “effective actions” could be taken by Mexico.
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Can Trump just unilaterally impose tariffs?
Probably. Trump invoked the International Emergency Economic Powers Act, which allows him to implement economic sanctions (among other things) to address “any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat.” Trump declared the immigration situation along the southern border to be a national emergency back in February, so he could possibly rely on that declaration to justify his unilateral tariff action.
OK, but why is Trump all of a sudden threatening a trade war with Mexico?
Let’s take him at his word: It’s apparently an attempt to get Mexico to curtail the flow of migrants into the United States from Central America. Trump launched his presidential campaign in 2015 with an attack on immigrants, and it’s been his most consistent theme ever since. But he’s also been frustrated in his attempts to build a wall (much less get Mexico to pay for it) and stop asylum-seekers from arriving at the U.S.-Mexico border.
He has often attempted to bully Mexico into shouldering more of the load of the international migrant crisis. For example, he essentially strong-armed Mexico into an arrangement that requires asylum-seekers to wait in Mexico before their court appearances in the U.S.). Trump is levying a severe economic penalty to try to force Mexico’s hand on immigration.
When would Trump’s proposed tariffs go into effect?
On June 10, starting at 5 percent. It’s possible that Republican senators might move to block the tariffs—they’re not happy with the economic impact the tariffs would have on their home states (more on that later). If Trump does attempt to declare another national emergency specifically linked to the tariffs, it would give congressional Republicans the chance to shoot it down, similar to when Republicans in the Senate nearly killed Trump’s attempt to declare a national emergency to build the border wall, according to Politico.
Hmm, 5 percent? That’s nothing! Sounds like this isn’t a big deal at all.
Wrong! Let’s do the math. Six of the United States’s top ten trading ports with Mexico are located in Texas, and in 2018 Texas imported more than $107 billion worth of goods from Mexico. At Trump’s proposed initial 5 percent rate, it would cost Texas $5.7 billion. Then if the proposed tariff ultimately rises to 25 percent on October 1, Texas could end up paying more than $27 billion in border taxes, which is… a lot.
There would be significant job loss in Texas, too—an economic consulting firm conducted an analysis and found that Texas could lose 100,000 jobs as a result of the tariffs, according to the San Antonio Express-News.
Last but certainly not least, Chipotle said it would have to raise the price of its burritos by five cents if the tariff is implemented.
Texas voters helped elect Trump in 2016. What might this mean for the people who voted for him?The tariff threat certainly falls in line with Trump’s campaign promises to crack down on immigration and to be tough and aggressive in relations with foreign powers, which is likely a plus in the minds of many of his voters in Texas, where border security is obviously a major issue. But it’s a perilous trade-off for many of his supporters here, since the tariff would undoubtedly have a negative economic impact on the state, particularly for typically conservative farming and ranching communities, which rely on Mexico as a major trade market (more on Texas farmers later). If the tariffs do result in job loss, it could turn away more of Trump’s Texas base.
What about border cities?
Good question! Border economies depend heavily on trade with Mexico. In fact, they have benefited greatly in recent years, as Mexico supplanted China as the United States’s top trading partner. Laredo just leaped over Los Angeles as the number one port in the nation, thanks almost entirely to booming trade with Mexico. According to NPR, $20 billion worth of goods passed through Laredo in March alone, and according to Forbes, Mexico accounts for 97 percent of all trade through the Port of Laredo. Local business owners in Laredo told NPR that they are concerned Trump’s proposed tariffs would cripple them in the long-run, while causing immediate logjams at international crossings as companies scramble to get as many shipments across as they can before the proposed tariffs would be implemented on June 10.
El Paso, too, would face serious economic ramifications should the tariffs go into place. Jon Barela, chief executive officer of the Borderplex Alliance, a regional economic development organization based in El Paso, the second-busiest port on the U.S.-Mexico border, told the El Paso Times that Trump’s plan is “misguided”” and would lead to job losses. “The president’s actions will have a devastating impact on our local economy,” Barela said, according to the Times.
Border lawmakers are understandably not happy with Trump’s tariff threat. In a statement to the McAllen Monitor, Brownsville Democratic congressman Filemon Vela called Trump’s plan “clearly insane” and said the president is running the country “like a mob boss.” And Representative Henry Cuellar, a Democrat who represents Laredo, called Trump’s proposed tariff plan “a dangerous mistake” that “will only hurt America’s economy and security.” In his statement, Cuellar also noted the poor timing. Congressional bodies in Mexico and the United States are in the process of deciding whether to approve a recently renegotiated NAFTA agreement, and the beginning of a tariff war between the two countries could spike the deal. “President Trump’s decision derails all progress that we have made on the trilateral trade agreement,” Cuellar said.
Wait, I thought trade negotiations with Mexico were pretty much all set after NAFTA was successfully renegotiated. What’s going on there?
It’s puzzling that Trump is threatening tariffs against Mexico when the U.S. and Mexico are both near the final stages of approving the U.S.-Mexico-Canada Agreement, which is essentially a new version of NAFTA. There’s legitimate concern that Trump’s tariffs could result in Mexico pulling out of the deal in retaliation. Mexican Deputy Trade Minister Jesús Seade said Monday that the tariffs would also place “an enormous boulder in the road” toward ratification of the agreement, according to The Wall Street Journal.
What about farmers?
A trade war with Mexico would be very bad news for Texas farmers. Laramie Adams, national legislative director for the Texas Farm Bureau, told the Austin American-Statesman that he is particularly worried the proposed tariffs could end NAFTA negotiations. “We don’t know exactly how they would retaliate, but in the past they have retaliated on agriculture,” Adams told the Statesman. “We don’t want to go back there. We understand [the United States has] got to hold other countries accountable, but at the same time our farmers and ranchers are struggling right now.”
The tariffs would fall most heavily on commodities that are traded with Mexico, particularly corn. “The Mexican market is of vital importance for corn farmers—particularly our farmers in South Texas,” Wesley Spurlock, president of the Texas Corn Producers Association, said in a statement. “These farmers have corn reaching maturity and have marketing plans reliant on an existing market with the country. … TCPA strongly encourages President Trump to reconsider using tariffs to solve non-trade issues. As Texas farmers—and farmers across the country—continue facing volatile economic conditions, this is not a move the agricultural industry and our rural economies can afford.” According to the association, Mexico was the top market for U.S. corn exports last year.
Is there anyone in Texas this would actually be *good* for?
Yes. Congressman. Randy Weber, R-Pearland, apparently:
— Randy Weber (@WeberforTexas) May 31, 2019
How have other Texas lawmakers responded?
Not unexpectedly, Democrats have almost universally panned the tariffs. Julian Castro, who is running for president, called Trump’s proposal “grade-A dumb” during an interview on CNN.
The real question is where Republicans stand on the issue. For the most part, they’ve been critical of Trump’s proposed tariffs. “I’ve previously stated my opposition to tariffs due to the harm it would inflict on the Texas economy, and I remain opposed today,” Governor Greg Abbott said in a statement, according to the Texas Tribune, adding that he supported Trump’s attempt to fix “our broken immigration system,” and calling on Congress to do the same. A spokesman for Senator John Cornyn also praised Trump for his “commitment to securing our border,” but noted that the senator “opposes this across-the-board tariff which will disproportionately hurt Texas.”
Congressman Kevin Brady, a Republican representing The Woodlands and the ranking member on the U.S. House Ways and Means Committee, sounded a similar note. “The President has made it clear that Mexico must do more to stop this crisis at the border, which seemingly has no end, and he is serious about taking whatever actions are necessary to find a real lasting solution,” Brady told the Tribune. “Mexico is a valued ally and the new tariffs are not yet in effect, so there is a window here for both countries to find common ground. It is in both of our interests to do so, economically and for stronger security.”
Of the Texans in Congress, senators Cornyn and Ted Cruz seem best positioned to do something. Both men were part of a group of angry Republican senators who met with Trump administration officials during lunch on Tuesday. According to Politico, the White House representatives present during the meeting “faced brutal push-back from the GOP… with some threatening that Trump could actually face a veto-proof majority to overturn the tariffs.”
Citing anonymous sources, the New York Times reported that during the meeting, Cruz called the tariffs a $30 billion tax hike on Texans, and told the Trump administration officials, “I want you to take a message back” to the White House: “You didn’t hear a single yes” from the Republicans at the meeting (Cruz has not yet publicly commented on the tariffs.) Cornyn, meanwhile, told the Times after the meeting, “We’re holding a gun to our own head.”
Complicating matters is the absence of President Trump, who is in London. “The problem is we didn’t have the decision makers there,” Cornyn said after the lunch meeting, according to Politico. “The president and half his cabinet is over in Europe, and obviously the clock is ticking. Time’s wasting. What we need to do is get in front of the president and have that conversation.”
Even if Cornyn or Cruz can get facetime with Trump to talk tariffs, it may not matter. Trump doesn’t seem ready to walk back his tariff proposal, even in the face of pressure from GOP lawmakers threatening a near revolt. “I don’t think they will do that,” Trump told reporters in London, per Politico. “If they do, it’s foolish.”
How has Mexico responded?
Mexican President Andrés Manuel López Obrador responded to Trump last week with a sternly-worded letter questioning Trump’s tactics, but he fell short of threatening tariffs of his own. “First of all, I want to express that I do not want a confrontation,” López Obrador wrote in Spanish. “President Trump: You can’t solve social problems with taxes or coercive measures. How does one transform, overnight, the country of fellowship with immigrants from around the world into a ghetto, a closed-off space that stigmatizes, mistreats, chases, expels and cancels legal rights to those who are seeking—with effort and hard work—to live free of misery? The Statue of Liberty isn’t an empty symbol. With all due respect, while you have the sovereign right to say it, the slogan ‘America First’ is a fallacy, because until the end of times, and above national borders, universal justice and brotherhood will prevail.”
Meanwhile, Mexican officials arrived in Washington, D.C., on Monday to discuss the proposed tariffs with the Trump administration. It appears unlikely that Mexico will implement a plan that would sufficiently curtail immigration before Trump’s June 10 deadline. “Mexico is ready to work on issues of common interest,” Mexican Foreign Secretary Marcelo Ebrard said at a press conference Monday in Washington, according to the Washington Post. “The imposition of tariffs will have a counterproductive effect and would not reduce the migratory flow.” Still, Mexico appears optimistic that they will find a solution before the tariffs go into effect. On Tuesday, López Obrador told reporters that he felt confident the two countries “will reach an accord before the 10th of June,” while Ebrard said there’s an 80 percent chance that the U.S. and Mexico reach a deal, according to the Post.