US neighbors prepare for a possible return of Trump

(Bloomberg) — Late last year, Joe Biden’s administration was facing a border problem, and not just on the U.S.-Mexico border.

Thousands of Mexican citizens took advantage of the visa exemption to fly to Canada and then try to cross into the United States heading south.

Canadian Prime Minister Justin Trudeau came under pressure from U.S. officials and local politicians to reinstate visa requirements that he ended in 2016. Critics wanted immediate action, but the Trudeau government moved delicately, taking time to meet with the Administration of Mexican President Andrés Manuel López Obrador and, in February, finally reimposing the requirement only for about 40% of arrivals.

This careful maneuver was more than just diplomacy. According to people familiar with the matter, senior officials in the Trudeau government were concerned that it would be a bad time to start a fight with Mexico. Within a year, they thought, Donald Trump could win another term in the White House, potentially reigniting a continent-wide battle over tariffs and trade. Canada and Mexico would have to present a united front.

In this case, Trudeau appears to have successfully navigated the problem, reducing arrivals without deteriorating relations with Mexico. But the biggest challenge may be yet to come.

As Americans head to the polls in November, concerns are growing in Ottawa and Mexico City that the next U.S. administration will limit trade between the three countries, which totaled nearly $1.5 trillion in trade last year. estate. The United States-Mexico-Canada Agreement — the deal reached in 2018 to replace the 1994 North American Free Trade Agreement — is scheduled for a joint review in 2026, and there is growing speculation that the U.S. will push to renegotiate parts of it, especially rules for automobile manufacturing and dairy products.

Trudeau launched a strategy aimed at recruiting American allies. He sent high-level Canadian politicians, diplomats and businessmen to meet with American CEOs, legislators and governors to talk to them about the importance of trade, especially for the automotive and energy industries.

Chinese investments in Mexico weigh heavily on its relationship with the US, and since December, Mexico has been working on an investment selection framework around national security to help alleviate US concerns. Of particular concern are Chinese companies that export cars from Mexico to the U.S. The two sides have met several times to discuss these issues, according to a person familiar with the matter.

In both countries, the unrest goes beyond Trump: it is under Biden that the US has clashed with Canada and Mexico over auto parts regulations. Last month, Biden announced the imposition of tariffs on $18 billion annually of imports from China on electric vehicles, batteries, chips, solar cells and essential minerals. This is in addition to previous increases on steel and aluminum.

But Canadian and Mexican officials say trade negotiations would be much more volatile and unpredictable if Trump were in charge.

Trump has promised to impose 10% tariffs on goods around the world if he wins in November, as part of his efforts to shore up manufacturing jobs in the U.S. He has not explicitly said how that would apply to Canada and Mexico, but the Canadian ambassador to the US has warned of global retaliation.

“A second Trump term will be very different” when it comes to trade, said Laura Dawson, executive director of the Future Borders Coalition, a binational group that promotes trade between Canada and the U.S. She said “adult oversight” around to Trump during his first term (people who largely supported trade) is now “few and far between.”

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In an attempt to find commercial allies, Canadian officials such as Industry Minister François-Philippe Champagne frequently travel to the United States. Executives from companies such as Coca-Cola Co, United Parcel Service Inc and Goodyear Tire have participated in these meetings. & Rubber Co, as well as Washington legislators.

In these visits, Canadians emphasize that their country is the main destination for exports from 35 states. They often travel beyond the border regions with Canada, to places like Georgia, South Carolina and Nebraska, to underscore how crucial Canadian trade is to those states’ economies. After all, Canada buys as many products from the US as China, France and Japan combined.

“When I look at people I say, ‘I hope they’re happy to see me because I’m by far their biggest customer,’” Champagne said in an interview during a recent trip to New York.

Although Champagne emphasized that he meets with very diverse people, some are clearly Trump-related figures. That includes Gary Cohn, vice president of IBM Corp. and Trump’s former top economic adviser, as well as Republican state governors such as South Carolina’s Henry McMaster.

Canada’s ambassador to the U.S., Kirsten Hillman, said officials have stayed in touch with people in Trump’s orbit over the past few years, targeting think tanks they believe would be influential if he wins a second term. .

“We meet with them often,” Hillman said at an event with the Council on Foreign Relations in Montreal. “Not only with the managers, but also with the people who write the policies. “My team and I, through the embassy, are in continuous contact.”

In Mexico, officials working on behalf of President-elect Claudia Sheinbaum, a López Obrador ally who has promised continuity for her policies, are creating separate but similar plans for trade negotiations with Trump or Biden, according to a senior adviser. The country’s main exports include cars, chemicals and agricultural products, and the US and Mexico have clashed over rules for energy companies as well as US corn exports.

The López Obrador Government prepared a document called “Plan Mexico” that frames trade deficits with Asia as an opportunity to produce more in North America and work more closely as a bloc. According to the analysis, if 10% of Chinese imports were replaced with goods manufactured in North America, it would boost economic growth and create demand for 600,000 more jobs in the US, 520,000 in Mexico and 260,000 in Canada.

Behind closed doors, Mexico’s largest companies express concern that Trump will link trade and migration issues, as he did in May 2019 — when he threatened tariffs if Mexico did not reduce the number of migrant arrivals at the U.S. border. U.S.—and how Biden has deliberately worked not to do so, according to a Mexican official, who asked not to be identified so he could discuss private conversations.

The US border recorded a record number of undocumented arrivals in fiscal year 2023 and, although it has slowed in recent months, there are concerns that this trend could quickly reverse. This month, Biden announced new measures to prevent migrants from filing asylum claims as part of efforts to limit crossings and combat perceptions that the border is out of control.

Mexican officials are also concerned that Trump wants to use military force to attack the country’s cartels, despite Mexico’s historic resistance to foreign troops operating on its soil, and that such actions could create more trade tensions.

In Mexico there is talk of bringing back Marcelo Ebrard as a member of the cabinet. He flew to Washington in June 2019 to negotiate a deal with Trump to deploy Mexico’s national guard to detain migrants in exchange for Trump dropping his threat of tariffs on Mexican exports. Ebrard met personally with Trump several times in the early years of the López Obrador Administration.

Juan Ramón de la Fuente, who served as López Obrador’s ambassador to the United Nations and therefore worked with the US during the Trump Administration years, is currently leading Sheinbaum’s transition. Like Ebrard, he could occupy a key position in his government.

At a recent event in Washington, Kenneth Smith Ramos, who was Mexico’s top trade negotiator during the USMCA talks, spoke about concerns that reopening the deal for review could result in new restrictions.

“Opening the USMCA is very dangerous given the political pressures, the protectionist pressures that exist in the three countries and around the world,” he said, speaking on a panel organized by the Center for Strategic and International Studies.

Original Note: Traumatized US Neighbors Gird for Possible Trump Second Term (1)

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