In our most recent monthly article, “The China Siege”, we likened the growing trade war with China and the US to an actual armed conflict. Here’s another parallel between martial and economic conflict: it’s hard to fight a war on two fronts at the same time.
After so much attention has been paid to the trade disputes with China, we’d almost forgotten that President Trump jump-started his political fortunes by challenging Mexico – our largest trading partner. We presumed the ongoing trade dispute with China might have created an incentive for the White House to avoid escalating conflicts with our allies; that appears to be wrong. Instead, last week the President threatened broad tariffs on all Mexican imports – announcing a 5% price hike starting June 10th – if Mexico doesn’t stop migrants from entering the US.
Diplomats are not sure what would satisfy the President. His chief of staff has intentionally left the goals (and intended methods) open to interpretation. So, since the goals of a “successful” negotiation are so unclear, could any action on the part of Mexico be interpreted as a political victory? Is this threat designed to generate some talking-points for the 2020 re-election campaign? Economic analysts aren’t sure, and several are starting to predict a recession by 2020 if the combined tariffs and retaliatory measures aren’t resolved within the next few quarters.