Trump to impose tariff of up to 25% on Mexico over migrant surge

United States President Donald Trump vowed to impose a 5% tariff on Mexican goods until that country stops immigrants from entering the US illegally – brandishing a weapon used against a widening group of countries and jeopardizing a new North American trade agreement.

The tariff would take effect on June 10, “until such time as illegal migrants coming through Mexico, and into our country, STOP”, Trump said in a Twitter post on Thursday night.

He warned that the levy “would gradually increase until the illegal immigration problem is remedied at which time the tariff will be removed”. The tariffs could rise as high as 25% in October, Trump said in a statement released by the White House.

The move, which has major implications for American automakers and other companies with production south of the border and the US economy as a whole, represents Trump’s latest expansion of his trade wars. 

It comes just days after he removed steel tariffs on Mexico that had caused retaliation against US farm products.

It also marries two of his signature issues – trade and immigration – as he ramps up his campaign for re-election in 2020.

The Mexican peso weakened by as much as 3% after Trump’s tweets, while investors fled to the safest assets as concerns over new trade conflicts mount. 

The Japanese yen gained while US futures tumbled and 10-year Treasury yields reached a fresh 20-month low. Initial reaction from Mexican officials was measured, with President Andres Manuel Lopez Obrador saying in a letter to Trump posted on Twitter that “I don’t want confrontation”. 

Lopez Obrador said his foreign minister and other officials would visit Washington the following day to seek agreement, and added that he’s not a coward and is acting on principles.

Jesus Seade, Mexico’s undersecretary of foreign relations for North America, told reporters in Mexico City Thursday at a previously scheduled event that the country won’t retaliate before discussing the matter with the US. 

But the tariff threat, he added, “if turned into reality, would be extremely serious”. Economists warned the move could hurt both countries.

Mexico’s exports to the US account for about four-fifths of total overseas shipments, or about 28% of its gross domestic product, according to Bloomberg chief economist Tom Orlik.