When the Trump administration signed the United States-Mexico-Canada Agreement to replace NAFTA, Illinois farmers cheered. The Illinois Farm Bureau said it was “extremely pleased” with this “important and timely step in the right direction.” In a phone session with U.S. Rep. Robin Kelly, D-Matteson, Steve Fourez, a district director for the IFB, urged her to support it, arguing, “It’s really important that we get some of these trade issues squared away.”
Squared away, alas, is exactly what the trade issues are not at the moment. In the midst of a raging dispute with China, President Donald Trump has turned his ire back toward Mexico. Trump is threatening to impose tariffs of 5% on all goods from Mexico unless the government stops illegal migration across our southern border. The duties would rise by another 5 percentage points each month, maxing out at 25 percent in October.
Senate Majority Leader Mitch McConnell says Republicans don’t support a new tariff on Mexican imports. Mexican officials were in Washington on Wednesday holding discussions with Vice President Mike Pence and others to try to negotiate a truce. There was no early readout on their discussions.
If Trump were to carry out his threat, it would be bad news for the Midwest and Illinois in two major ways. The first is that it would disrupt supply chains and markets that companies in Illinois depend on, while raising prices for producers and consumers on goods from Mexico. The second is that it could be fatal to the USMCA, which would be a boon to those same consumers and producers but requires the approval of Congress.
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Mexico is the state’s second biggest export market, buying nearly $10 billion worth of goods in 2017 — up from less than $1.7 billion in 1994, the year that NAFTA eliminated most tariffs. Some 200,000 jobs in Illinois are tied to trade with Mexico. Two of our iconic manufacturers, Caterpillar and John Deere, have operations there.
The tariffs would be a blow to them and other companies. Auto plants, of which the Midwest has many, would have to cope with harmful disruptions in their supply chains. The U.S. Chamber of Commerce says the higher tariffs could amount to a tax increase of $17 billion on U.S. businesses and households.
Prospects for the USMCA have also dimmed. “If the president goes through with this, I’m afraid progress to get this trade agreement across the finish line will be stifled,” Sen. Joni Ernst, R-Iowa, lamented. Senate Finance Committee Chairman Charles Grassley, R-Iowa, said the tariffs would “seriously jeopardize” the chances that Congress will approve the deal. He urged the president to use other tools to persuade Mexico to help with our border crisis.
Maybe this latest gambit will force the Mexican government to crack down on the flow of migrants from Central America through its territory on the way to the United States. Maybe Trump will decide not to impose the tariffs in the end. In that case, the damage could be modest and the benefits might make up for it.
But given Trump’s penchant for raising barriers to trade with a wide range of countries, we fear the president simply doesn’t grasp the value of free trade for people on both sides of the border. If he stays on this path, Midwesterners are not the only ones who will come to regret it.
[ Editorial: Congress, this new trade deal would be good for Illinois farmers and the U.S. economy ]