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Mexico’s government should hit back on any US auto tariffs: adviser

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Mexico’s next President Andres Manuel Lopez Obrador addresses supporters in Mexico City. Reuters

MEXICO CITY (Reuters) – If the United States slapped duties on Mexico’s auto exports, the government should retaliate against US businesses, a top economic adviser to presidential election winner Andres Manuel Lopez Obrador said on Monday.

The veteran leftist, who won by a landslide on Sunday, says he wants friendly relations with the United States. However, he has vowed to take a firm stand against efforts by US President Donald Trump to impose his will on Mexico.

Graciela Marquez, Lopez Obrador’s designee for economy minister, said the new administration should push back against “protectionist” moves by the United States on trade, backing the policy of the outgoing Mexican government.

Mr Trump is trying to exert leverage over Mexico and Canada in his bid to rework the North American Free Trade Agreement (NAFTA), and last month kicked off a trade spat with tariffs on steel and aluminium. That prompted swift retaliation from Mexico.

The United States has also started a trade investigation into imports of vehicles and auto parts that could lead to hefty tariffs. Ms Marquez said Mexico could not simply passively accept such measures.

“So I think we would have to take measures to raise tariffs in strategic sectors,” she told Reuters in an interview.

The next Mexican government will take office on December 1, and Ms Marquez said she hoped to meet “as soon as possible” with current Economy Minister Ildefonso Guajardo to review the tasks ahead, including the ongoing renegotiation of NAFTA.

While noting Mr Trump said at the weekend he wanted to wait until after the US mid-term elections in November to agree a new NAFTA, Ms Marquez said she would be happy to see the renegotiation concluded before taking office, if possible.

Government officials have said top-level NAFTA talks could begin again this month. A spokeswoman for US Trade Representative Robert Lighthizer declined to comment on what the election of Lopez Obrador could mean for the negotiation.

Mr Trump wants to reduce the United States’ trade deficit with its southern neighbour, arguing that the NAFTA has caused jobs to move south to lower-cost Mexico. Proponents of NAFTA reject this, saying Mexico has helped keep the region more competitive.

The NAFTA talks have been stalled over US insistence on redrawing auto industry rules to require more regional content, higher salaries in the sector, and other proposals including a so-called sunset clause that would automatically kill the 24-year-old accord if it is not renegotiated every five years.

“We’re very concerned about the sunset clause because that…would generate a lot of uncertainty over investment in the North American region,” said Ms Marquez, an academic.

Ms Marquez said she did not believe the bilateral trade balance was a useful measure of US-Mexico economic relations and that value added statistics painted a more accurate picture.

Measured by value added – which sets out how much individual parts of a product are worth in the assembly chain – Mexico ran a trade deficit with the United States, she argued.

Even if traditional measures are used, China, not Mexico is the principal cause of the US deficit, she said.

The North American region is best served by strengthening its own competitiveness, not internal spats, Ms Marquez added.

She also said Mexico could not simply raise its wages to suit the United States in the NAFTA talks.

“It’s not because we don’t care about higher wages, it’s because if you increase wages in one sector abruptly, it has a very distorting effect,” Ms Marquez said.

Ms Marquez said she saw “very little chance” of NAFTA coming to an end, but that Mexico had to prepare for the eventuality.

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