“Tariffs will be raised to 10 percent on July 1, 2019. Tariffs will be increased to 15 percent on August 1, 2019, to 20 percent on September 1, 2019, and to 25 percent on October 1, 2019.” https://t.co/NVbbgfxFcu
— Sven Henrich (@NorthmanTrader) May 30, 2019
Yea, that’s not gonna happen.
Why? Because economics and politics.
On the economic front it would push the US into a full blown recession ahead of the 2020 election (which some argue may happen anyway), but this action would seal the deal.
For one Mexico is not a small trading partner:
Add the existing pressure (and perhaps expanding pressure) coming from tariffs on China and threatened retaliatory measures and you end up with a price pressure spiral on consumers and businesses nobody will stand for.
And that brings us to politics. It’s all fun and giggles as long as nobody gets hurts but even the Republican donor base is likely to run out of patience way before a 25% tariff gets implemented.
At the end of the day political conviction ends with the pocketbook and a 25% tariff on Mexico would hurt a lot of Republican corporate donor interests.
The administration will get clobbered from within. And that pressure may begin today. Wall Street is not impressed. And neither is corporate America. And neither will American consumers nor the Mexican government which has been negotiating a USMCA deal with the US government.
So while Mr. Trump may be playing bravado to his base this opening of a new tariff war front will find little support anywhere and is not going to reach its threatened conclusion.
In other words: 25% tariffs on Mexico? Yeah, that’s not going to happen.