Finally, good news for proponents of open markets as the US and Mexico have reached an agreement which suspended the recently proposed tariffs. The news may provide a breath of fresh air to markets as the tariff news was not well-received by market spectators.
American President Donald Trump, who is well-known for taking extreme measures, threatened only last week that, starting from June 10, his administration was going to impose 5% tariffs on all imports originating from Mexico as a measure to force the Mexican government to curb illegal immigration. The tariffs were to go up as much as 25% in the coming months in an event of failure of the Mexican government to take the dictated actions.
As unprecedented as such an abrupt announcement may be, it surely did not come as a surprise for most people. The Trump administration has made cracking down immigrants as its major priority in spite of large court conflicts and opposition by the Democrats-led Congress. The recent decision of slapping Mexico with gigantic tariffs may have been inspired by Hawk Stephen Miller’s conservative radio commentary about the issue and suggestion to use tariffs.
With markets already adjusting amid on-going US-China trade war conflict, Trump’s sudden decision sent a shockwave to markets as Dow dropped by 3% to continue its biggest losing streak in nearly 8 years. As a direct impact, the Peso also felt reeling against the American Dollar which, in turn, put pressure on Mexico-based car producers such as Ford, Fiat, and GM. The United States Chamber of Commerce started considering different legal options over these tariffs and various Republican Senators also openly opposed such a move.
However, President Trump entered into an agreement with the Mexican government to postpone the tariffs that would otherwise be effective from the coming Monday. In return, Mexico has agreed upon taking ‘strong measures’ against illegal immigration through United States Southern borders.
Both countries issued a joint declaration, according to which Mexico agreed to “increase enforcement to curb irregular migration”. Mexico will also deploy its national guard to its Southern border on priority basis in order to discourage migrations from Central America.
Furthermore, it has been announced that those seeking asylum in the US will have to go back to Mexico until the outcome of the asylum claim arrives. Meanwhile, the US agreed to accelerate decision making on asylum applications. Mexico has also announced to provide education, healthcare, and job to asylum seekers.