The Latin American Economic Observatory studies the evolution of trade relations between Mexico and Washington: its findings shed light on this new stage of the commercial ‘war’ now directed towards Mexico. We explain what is really happening with international business relations, influenced by the US crisis.
“To the four countries with which the US has a deficit – China, Japan, Germany, and Mexico – have decided to make them a commercial war,” Oscar Ugarteche, an economist and member of the Institute of Economic Research of the National University of Mexico, told Sputnik. which coordinates the observatory.
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“We must underline the word ‘war’, before the word ‘tariff‘, because these [last] come and go but what is here is a war to show that the US is first and foremost, a bit like Germany of 1936, “said the economist.
Ugarteche acknowledged in dialogue with Sputnik his surprise at the withdrawal of the tariff threat from the negotiations that took place during the last weeks. Throughout the negotiations between the Mexican Foreign Ministry and the Vice President of the United States, Mike Pence, it ended up revealing its true character: to advance in the restriction of migration in Mexico.
Originally, President Donald Trump had threatened to tax all Mexican imports with a 5% tariff, ” until the problem of illegal migration is resolved .”
However, Ugarteche qualified the impact of this measure, indicating that 80% of trade between Mexico and the US is “intra-firm”, that is, within firms that operate in the Latin American country but trade with offices north of the river Bravo, in particular, four: General Motors, Hewlett-Packard, Dell and Sony (for televisions)
“Therefore, although tariffs do threaten the exchange rate and raise the interest rate, in terms of trade, nothing happens, Mexico does not come or come,” said the expert.
The consequence would be paid by the US, raising its production costs by 5%.
“The only trade problem that the US has with Mexico is that production costs in Mexico are a fraction of what they are in the US They will never compete with that,” said the economist consulted by Sputnik.
Losing the war
According to the analysis of the Latin American Economic Observatory (Obela), the result of more than a year of the trade war between the US and China has left the western country ill.
According to the analysis, published on the Observatory website, “US exports to China have decreased 13%, between February and November 2018, while imports have increased 16%, in the same period.”
The study, conducted by Ugarteche and researcher Armando Negrete, highlights that the balance for the US of the commercial dispute with China has led to an increase in the trade deficit; an extension of the decline in commercial competitiveness; and a decrease in its productivity, caused by the increase in prices of imported intermediate prices
