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American President Donald Trump had been holding his guns against the Mexican government for a very long time. In fact ever since Trump was a Presidential candidate, he has accused Mexico of being a parasite and has threatened aggressive measures against the southern neighbours. These threats issued by America were met with an equally rude response by the Mexicans. As a result, the relationship between the two countries deteriorated significantly. Economic and political analysts were almost certain that trade was about to break out between the two countries. However, surprisingly, the two bickering neighbours seem to have found common ground. A trade deal has been announced between America and Mexico, and as a result, the unhealthy competition will now be replaced by co-operation. In this article, we will discuss the economic and political context of this deal.
Trump has been facing a lot of resistance internally from the Democrats. In fact, Nancy Pelosi, leader of the Democratic Party, has accused Trump of reckless behaviour which has jeopardized national interests. Pelosi is of the opinion that Trump has already started a trade war with China as well is Europe. If another one is started with Mexico, the United States will be running short of allies and might end up deteriorating the already fragile condition on its southern border. Hence, Trump was under pressure to reach an agreement with Mexico so that he continues to have the support he needs to take on China, which is a much bigger and formidable enemy.
Similarly, President Obrador from Mexico is also under pressure. This is because he has promised to improve the economic condition of the people of Mexico. Trade with America is one of the main ways that the Mexican economy can be improved. This is the reason why the trade deal between Mexico and America was also a priority for the Mexican President.
The trade deal between Mexico and America has been announced. Both parties stand to gain a lot from this deal. The main benefits of the deal have been summarized below.
According to Donald Trump, the deal will solve the immigration problem that America faces right now. This is because, at the present moment, huge caravans of immigrants from South American countries leave for America. They come to America via Mexico where they are not stopped.
As per the new trade deal, Mexico will aggressively stop these immigrants from making it to America. As a result, Mexico will act as a buffer state between America and South American countries.
Immigrants will have to stay in Mexico and apply for an American visa. Only once their visa gets approved will they be allowed to cross the American border. Donald Trump believes that with the help of this deal, he has greatly reduced the tasks which were to be undertaken by the American security forces.
Securing the southern border of America, which was so important to Trump and the American people will now be done by the Mexican forces. The money saved in the process can then be used to build the wall. This will also help Trump to claim that he has indeed got Mexico to pay for the wall, which was one of his campaign promises.
Trump has also got the Mexicans to agree to buy agricultural products from America. This will benefit the American farmers who have suffered economically because of the trade war between the United States and China.
The farmers also happen to be Donald Trump’s biggest vote bank. This is the reason why the deal with Mexico is economically as well as politically prudent as far as Donald Trump is concerned.
It must be noted that the claims regarding the agricultural component of the deal has not been verified as yet. This information has been provided only by Donald Trump. The Mexicans have not made any reference to this component of the deal.
From the Mexican point of view, the deal is a success since Donald Trump will no longer threaten to impose tariffs on the country. As a result, American multinationals will continue to manufacture products in Mexico since it has lower labour costs and is located close to America.
As of now, Mexico exports more than $350 billion worth of products into the United States, and this is likely to increase in the future. Ever since Donald Trump started threatening to impose tariffs, American investment into Mexico dropped rapidly. Now since there is no threat looming large, the Mexican economy is likely to grow by leaps and bounds once again.
The United States has also agreed to economically help Mexico and other South American countries. As of now, more than $5.8 billion per annum has been allocated by America for this cause. This is meant to solve the economic crisis in central and South America so that the immigration problem can be permanently resolved.
For the moment, it does seem like America and Mexico have reached a deal. However, further details about this deal will be released in six months. That is when the provisions will be known, and accurate analysis will become possible.
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What the Current Wave of Protectionism and Populism mean for the Future of Globalization and Free Trade
February 12, 2025
