Mexico has been anxiously awaiting Donald Trump’s presidency and the impact it could have on the country.
We have to be open to re-negotiating some points of NAFTA - to Mexico's advantage.Foreign Secretary, Mexico
The inauguration of a man who has consistently threatened to impose dramatic changes in US-Mexico relations comes at an inopportune time for Mexicans. Drug violence is on the rise, the government is struggling to curb corruption and gas prices have spiked.
Concern over the outlook has seen the Mexican peso plunge against the dollar.
Isidro Morales, the Latin American Policy Director at the Monterrey Institute fears the country is in a position of weakness.
“We are so vulnerable to what happens in the United States, that it’s enough for Trump to simply say he is going to raise taxes for Mexico, then boom, there’s an outflow of capital. We are in a state of great vulnerability.”
Added to this are the pledges Trump made during his election campaign.
NAFTA and trade tariffs
Among other things, Trump says he will force Mexico to renegotiate the North American Free Trade Agreement (NAFTA) which allows for the tariff-free import of goods to the States.
He is, in particular, calling for levies of 35 percent on US and international car-makers, which manufacture in Mexico and export to the US, in a bid to force them to create jobs north of the border.
A mass shift would be devastating for the Mexican car industry, which is the biggest in Latin America.
Ford and Fiat Chrysler – both major manufacturers – have already changed their plans. At the start of 2017, Ford abandoned plans to build a 1.5 billion euro factory in Mexico, saying it would, instead, invest in a plant in Michigan.
Fiat Chrysler has announced it will create 2,000 jobs in Ohio and Michigan. It has also warned it may need to close its Mexico operations if Trump’s new tariffs are imposed.
In addition, Trump has threatened both General Motors and BMW with a border tax on vehicles built in Mexico.
BMW has shown no signs of caving, yet, and is moving forward with plans to build a new factory in the Latin American country. But, GM has since said it will move 450 new pickup truck axle-making jobs up to Michigan.
Trump’s anti-immigration rhetoric is also a cause for concern.
One of the most talked-about issues is the threat to build a border wall separating the two countries, which he says will be paid for by Mexico.
It’s a project that faces numerous financial and logistical challenges. The US-Mexico frontier is the busiest and one of the longest land borders in the world. It covers four US states and six in Mexico.
Taking the example of one of the four US states, Texas voted for Trump’s Republican Party in the 2016 US election. However, most of the counties on the Texan border voted blue, in support of the Democrats.
Arizona also favoured Trump, but a large section of its border, covering Pima County and Santa Cruz County, voted against him.
New Mexico and California both voted blue.
However, regardless of any potential opposition, America’s 45th president has vowed the wall will be built, even if the US has to foot the bill initially and be reimbursed by Mexico at a later date.
He has also promised to deport millions of illegal migrants from the US and to tax money being sent home from foreigners working in the States, to help pay for the frontier wall.
Morales suggested a mass exodus from the US was unlikely.
“There will be deportations but probably at the same level as under Obama. Perhaps, it will increase a little bit but I do not believe there will be the deportation of three million that he has proposed, because the capacity for police to deport so many does not exist.”
Negotiation is key?
Analysts say the Mexican government is looking to negotiate. President Enrique Peña Nieto recently appointed an acquaintance of Trump’s son-in-law, Jared Kushner, to the role of foreign relations secretary, indicating a diplomatic approach could be on the cards.
Luis Videgaray Caso suggested Trump would be open to discussion.
“This is a man who has negotiated all his life,” he said. “We have to be open to re-negotiating some points of NAFTA – to Mexico’s advantage.”