WASHINGTON — The specter of a trade war between the U.S. and Mexico continues to intensify after a dispute erupted last week over President Trump’s vow to make Mexico pay for the construction of a massive wall along the shared border with a possible 20 percent tariff on Mexican imports.
The administration’s actions related to Mexico came under scrutiny on Sunday when a key Trump adviser was featured on “Fox News Sunday” about the potential impact of a trade dispute. On a separate Sunday show, White House Chief of Staff Reince Priebus reiterated that a tariff on Mexican imports is among a “buffet of options” being considered.
Chris Wallace, host of the Fox program, grilled Kellyanne Conway, counselor to the president, about the frayed relationship with Mexico and a trade war that could hurt U.S. consumers and businesses.
“[Mexican] President [Enrique] Peña Nieto canceled his visit this week,” Wallace said. “It’s not a good thing, is it? That one of our closest allies, our immediate neighbor to the south — and they had a meeting scheduled for Tuesday — [canceled]. You think that’s a good thing?”
The meeting between Trump and Peña Nieto had been ostensibly to discuss Trump’s intent to renegotiate the 23-year-old North American Free Trade Agreement between the U.S., Mexico and Canada.
However, Peña Nieto canceled after Trump signed an executive action directing the construction of a massive wall along the U.S.-Mexico border. White House press secretary Sean Spicer subsequently added fuel to the fire when he told reporters that a 20 percent border tax on Mexican imports is under consideration as a possible way to pay for the wall.
In place of an Oval Office meeting, Trump and Peña Nieto held an hourlong phone conversation on Friday in the midst of the heightened tensions.
A trade war with Mexico could hurt well-established supply chains for brands, retailers and textile producers. In addition, one of the options the Trump administration is considering to pay for the wall — a 20 percent tariff on Mexican imports — would raise costs for companies and consumers.
NAFTA has been an important trade deal for the U.S. fashion industry, which has developed a strong Western Hemisphere supply chain that is important for both apparel brands and retailers making clothes in Mexico and Canada, as well as a key export market for U.S. textile producers.
Mexico is the fifth largest apparel and textile supplier to the U.S. based on volume, which hit 2.25 billion square meter equivalents for the year to date through November, according to U.S. data. Imports of apparel and textiles to the U.S. from Mexico were $4.4 billion for the year ending Nov. 30.
In addition, Mexico is the number-one market for U.S. textile and apparel exports, totaling $5.96 billion for the year ending Nov. 30, while Canada is the second-largest market for U.S. textile and apparel exports, which totaled $5.15 billion, according to government data. Textile exports account for the bulk of the combined total of $11.1 billion in exports to Mexico and Canada.
Both Conway and Priebus said a tariff on Mexican imports is still an option, despite the concern it raised in trade circles and in the business community last week.
“There is no final conclusion on exactly how this wall is going to be paid for by the Mexican government, “Priebus said on the CBS show “Face the Nation.”
“It can either be through a tax on goods coming across the border. It [could] be through tax reform and a formula on import and export taxes and credits.It could be on drug cartels. And it could be on people that are coming here illegally and paying fines. Or it could be all of the above,” Priebus said.
“There is a buffet of options that we have in order to pay for this wall. We need to pay for the wall. We will build the wall. And it’s going to get done,” he stressed.
Conway defended Trump’s actions on the wall and reiterated his concern about the trade deficit with the North American country.
“It’s a great thing that they spoke for an hour,” Conway said. “I tell you what is not a great thing. It’s not great that we have a $60 billion trade deficit with Mexico,” she said, adding that a weak border allows drugs and illegal immigrants to flow freely to the U.S.
But Wallace repeatedly asked Conway if the White House is concerned about the frayed relationship, asking if the administration is going to try to “work out relationship with Mexico that doesn’t so offend the Mexican president that he has to cancel a meeting and where relations with the U.S. become a matter of national honor.
“Mexico is our third-largest trading partner. If we slap a border tax on their imports and 20 percent is a number that has been mentioned by people in the White House, U.S. consumers will have to pay more for such things as cars and fresh food and six million U.S. jobs that depend on trade with Mexico will be hurt if they tax our exports to them,” Wallace said. “In addition, if Mexico goes into a recession then we’re going to have even more illegal immigration. Has all of this been thought through?” he asked Conway.
Conway reiterated that a 20 percent tariff is “one possible option in terms of funding the wall” and she noted that tighter border security under Trump, and the new wall, will prevent many illegal immigrants from crossing into the U.S.
“I’m asking you a question about a possible trade war,” Wallace persisted. “Isn’t that a dangerous thing if we are slapping taxes on their imports and they’re slapping taxes on our imports? Doesn’t that destabilize Mexico politically and economically? I’m not saying we shouldn’t build a wall or protect our border. I’m just saying there is a good way of working it out and there’s a bad way of working out.”
Conway said Trump won the election based on the message that he would push for “fundamental fairness” in trading relationships.
“He’s telling Mexico that this trade imbalances stops. This idea that we’re always worried about the other country, we’re always worried about its citizens — the President says America first,” she said.