News of progress between US and Mexico sends markets higher
US stocks and oil prices rose on Thursday afternoon on reports that Mexico and the US were getting closer to a deal.
Reports that a deal on migration between Mexico and the United States could be close pushed markets higher on Thursday.
The two countries are holding bilateral talks in Washington in the hope of avoiding a trade war. Last week, US President Donald Trump announced his administration would levy new tariffs of five percent on Mexico beginning June 10 if the country didn’t act to curb migration into the US.
Stocks and oil prices rose on Wall Street on Thursday afternoon on reports that the two sides were getting closer to a deal.
But US Vice President Mike Pence said discussions would continue “in the days ahead” and that Mexico had to take “decisive action” to avoid tariffs. The decision on whether to move forward with the tariffs would be up to Trump, he said.
Mexico has offered to send up to 6,000 members of its national guard to secure its southern border with Guatemala to contain migrant flows, according to two people with knowledge of the matter. A deal could also include a provision to make it easier for the US to deport Central American asylum seekers, the Washington Post reported.
Mexico’s finance ministry said it blocked the bank accounts of 26 people for “probable links with human trafficking and illegal aid to migrant caravans.”
Bloomberg News, citing people familiar with the matter, reported that the US was considering delaying tariffs to allow for more negotiations.
In response to the report, the White House said its position on the Monday deadline had not changed. “We are still moving forward with tariffs at this time,” said spokeswoman Sarah Sanders.
Talks are set to continue at the State Department on Thursday evening, CNBC reported. However, with Trump on a trip to Europe until Friday night, an agreement by the US side is not expected on Thursday.
If the tariffs go ahead, the US would be in a serious trade dispute with both China and Mexico – two of its three top trading partners.
Trump said on Thursday he would decide whether to impose tariffs on at least $300bn of Chinese goods after attending a meeting with leaders of the world’s largest economies this month.
Officials at both the US Federal Reserve and International Monetary Fund separately warned that global trade tensions and rising tariffs posed an increasing risk to decades of US expansion, as well as to the global economy.
Mexico’s economy in the crosshairs
New tariffs on Mexico could send the country into recession. This week two major credit rating agencies downgraded the country’s sovereign debt rating. Both Moody’s Investor Service and Fitch Ratings cited trade tensions among other risks for lowering Mexico’s ratings.
Speaking on Thursday, Mexico’s President Andres Manuel Lopez Obrador expressed some optimism saying that the US authorities had not “closed themselves off to dialogue.”
Despite this, Mexican officials have prepared a list of US goods that may face retaliatory tariffs if talks between the two countries fail.
These tariffs would target items produced in US agricultural and industrial states. These states are considered strongholds for Trump’s electoral base. China has taken similar steps, knowing that Trump will be seeking re-election in 2020.
The head of the US House of Representatives Ways and Means Committee vowed to take steps to block the tariffs.
“If the president does declare a national emergency and attempt to put these tariffs into place, I will introduce a resolution of disapproval to stop his overreach,” Richard Neal, a Democrat and chairman of the committee, said.
Hog farmers in the US are worried that Mexico could hit back on products such as pork if the proposed tariffs go ahead next week. Mexico bought about $1.5bn worth of US hams and other pork products in 2017, making it the sector’s top export market by volume.
“People are really scared,” said Nick Giordano, vice president and counsel for global government affairs at the National Pork Producers Council. “This is generating a tremendous amount of uncertainty and potentially if this goes forward, it’s going to be financial turmoil.”