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Policy commitments USMCAUSMCA. gdpYour browser does not support the element.made by President-elect Donald Trump often lack precision. Not so on November 4th, the final day of campaigning, at a rally in North Carolina. Mr Trump kicked it off by announcing that one of his first calls as president would be to Mexico’s President Claudia Sheinbaum. “I’m going to inform her, on day one or sooner, that if they don’t stop this onslaught of criminals and drugs coming into our country, I am going to immediately impose a 25% tariff on everything they send into the United States of America.” Mr Trump’s policy could not have been much clearer. “You’re the first ones I’ve told it to,” he told the cheering crowd.There is little to suggest that his threat this time is not serious. Ending illegal migration across the United States’ southern border is one of the chief promises that led to Mr Trump’s historic re-election. In his victory speech on November 6th he declared that “nothing will stop me from keeping my word”. Along with the Republicans’ likely control of Congress, Mr Trump’s victory is a “nightmare scenario” for Mexico, laments Jorge Castañeda, a former foreign minister.The slump in the peso, which reached 20.8 to the dollar after the race was called for Mr Trump, its lowest rate in two years, illustrates the scale of the economic damage that investors believe Mexico could suffer. During Mr Trump’s first term, the country benefited from the tariffs applied to China. Companies looked to Mexico as an alternative production site, a trend boosted by the pandemic, which incentivised shorter supply chains. In 2021 Mexico overtook China to become the United States’ biggest trade partner.All that is now imperilled. Ms Sheinbaum and her team are in a “near-shoring bubble”, says Lila Abed, head of the Mexican Institute at the Wilson Centre, a think-tank in Washington. “Reshoring [to the United States] and protectionism are back.” Several American firms have paused planned investments in Mexico, including Tesla, run by Mr Trump’s buddy, Elon Musk. Mr Trump has no qualms about putting tariffs on allies and adversaries alike. He hates trade deficits, and the United States imported $152bn more in goods from Mexico than it sold to it last year. That was the largest deficit the United States ran with any country bar China.Even if Mexico somehow escapes tariffs, Mr Trump might break the United States-Mexico-Canada Agreement () through other means, despite having negotiated it during his first term to replace the North American Free Trade Agreement. He says he wants to turn a review of the deal in 2026 into a renegotiation. One reason is anger over Chinese investment in Mexico. He rails against Chinese-made cars flooding into the United States from Mexico, ignoring the fact that no Chinese firm has yet produced a single car there. Mexico’s government has just made itself more vulnerable on Its recent are potentially in breach of the treaty.Disrupting the North American trading bloc would hurt all three of its members. Putting tariffs on Mexican imports would raise prices for consumers in the United States. But Mexico would suffer most. A whopping 83% of its exports go to the United States, worth about a third of its . Its economy, already sluggish, could fall into recession. Ms Sheinbaum’s cash-strapped government would then be left without the money to pay for the social programmes that are the foundation of its support, let alone the cost of the massive enforcement that Mr Trump wants Mexico to enact to stem the flow of migrants.Mr Trump says his tariff threats have a “100% chance of working”. His confidence may stem from having successfully wielded the threat of tariffs against Mexico before. In his first term he used it to force Mexico to start keeping migrants on its own side of the border while their asylum claims were processed. Mexico deployed some 15,000 troops to its northern border to curb the migrants’ northbound flow, and 6,500 to its southern one.As well as another deployment on a similar scale, this time Mr Trump will try to force Mexico to accept “safe third country” status so that non-Mexican migrants must claim asylum in Mexico instead of the United States. Mexico has flatly refused this, calling it a “red line”. He may also tell Mexico to co-operate in accepting back some of the almost 5m Mexicans who live in the United States after entering it illegally. They are among the millions of people he promises to deport.Even Mr Trump’s most hyperbolic threat—to bomb Mexico’s criminal gangs to halt the production of fentanyl, a synthetic opioid that killed some 75,000 people in the United States last year—may feel less like a bluff to Mexican officials facing Mr Trump’s second term. Law-enforcement agencies in the United States have increasingly worked against Mexico’s criminal groups without Mexico’s co-operation in recent years. Mr Trump’s officials are unlikely to have much appetite for joint action. He has suggested designating Mexico’s gangs as foreign terrorist organisations to give his government still more leeway to go after them.In private, Mexican officials have digested Mr Trump’s win with resignation. “Unlike 2016, it was not a surprise,” says one. Ms Sheinbaum has responded with optimism, announcing that Mexico has “no reason to worry” about the United States’ president-elect. She felt the need to emphasise that Mexico is a “free, independent, sovereign country”. Nonetheless, she will have to play Mr Trump’s transactional game and come up with offers tempting enough to fend off tariffs.Mexico does have some leverage, especially on migration, which it has proved willing to use. The number of irregular migrants crossing the border with the United States fell by 77% between December 2023 and August this year (see chart), largely thanks to enforcement by Mexico. Ms Sheinbaum could do as Mr Trump wants and deploy even more soldiers to deal with migrants. Mexico is no longer just a route through which migrants reach the United States, but a destination in its own right too. So Mexico’s interests could converge with Mr Trump’s, says Ms Abed. Indeed, one Mexican official says they would be “delighted” if the United States managed to stem chaos at the border.But it is unclear how much more Mexico can do. Even with better technology and a lot more money it will not be possible to stop everyone who wishes to pass through its large and varied territory to cross the 3,200km-long (2,000-mile) border with the United States. It would be more controversial to work with Mr Trump to accept back deported Mexicans, breaking up families. “Giving something for nothing is very dangerous,” says Mr Castañeda.On trade, Mexico wants to convince Mr Trump that it can be a useful part of a regional bloc to out-compete China by working together. Officials say they will encourage companies to source more of their components from Mexico rather than China. That is easier said than done, especially when many of those importing Chinese parts are American companies.On security, Ms Sheinbaum is more serious than her predecessor about tackling Mexico’s gangs. Her security policy, which includes better intelligence-gathering and information-sharing, offers opportunities for bilateral co-operation, too.Mr Trump will not be able to do everything he has threatened. But even if he carries out a fraction of it, Mexico is in for a rough ride.
