Spoiler alert: this gets complicated

Mexican President Claudia Sheinbaum speaking a press conference in Mexico City this week. Image credit: Presidency of Mexico.

by Arturo Sarukhan. Ambassador Sarukhan is the President of Sarukhan + Associates LLC, a former diplomat and Mexican ambassador to the US.

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In response to statements emanating from the Mexican presidential bully pulpit that with the United States “we are doing better than any other country,” that “we dialogue with respect and on equal terms,” and that “we coordinate, we collaborate, but we do not subordinate ourselves,”— and also in response to narratives about how Mexico and its president deal with Donald Trump — a steady dose of realism and a reality check - in Mexico’s Congress and across the media, business organizations, and society at large- are urgently required, and we need to carefully weigh where things stand.

While navel gazing in the current juncture of the relationship with the US may feed egos and polls, it’s also dangerous. It can make us short-sighted and cause us to lose sight of the reality looming beyond the horizon. This is especially true since 2018, when Mexico irresponsibly turned its back on the world and on its closest diplomatic and trading partner. But - with Trump having once again kicked the can down the road - Mexico now faces 90 days of uncertainty on tariffs. That’s on top of the looming threat of the unilateral US force against transnational criminal organizations, and a steady stream of pressure points from Washington on a wide-ranging number of issues across our shared bilateral agenda. At no time since her swearing in and — more importantly — during the six months that Sheinbaum’s government has coexisted with the new US administration, has such a national discussion been so urgent in Mexico. 

What Mexican governments — both this one and the previous — have failed to grasp is that concessions today only embolden and incentivize Trump to demand more tomorrow.

Trump learned this in 2019 with López Obrador, linking punitive tariff threats to migration controls. Biden parked this thematic linkage, but in Trump’s second term the same tactic is back, but turbocharged: migration again, plus fentanyl, water, tomatoes, the New World screwworm, civil aviation — and whatever else piles up this week. By proposing, as a measure to cut the Gordian knot of tariffs and what animates them in the White House, a “global agreement” which de facto intertwines migration, security, and trade, Mexico is falling into Trump’s trap of thematic linkage – and contamination – of the agenda.

In an asymmetric power relationship like the one Mexico has with the US, thematic linkage only favors the stronger party. That is why for three decades Mexico strove to address and resolve the different items of our complex and rich bilateral agenda in separate, watertight, thematic silos. A wiser move would be to show that Mexico might be willing, if push comes to shove, to resort to putting potential compensatory, retaliatory, or reciprocal measures on the table. This per se would not neutralize Trump, but they would create pushback from relevant US political and economic actors and potentially restrain him, as we have seen on other trade fronts.

Most worrying, however, is the Panglossian optimism with which many in Mexico reacted to the new three-month negotiation window and the comparisons to Canada. Because at the end of the day, despite the difference in positions between the leaders and governments of both nations, today we are basically facing the same tariff and diplomatic panorama.

Let me explain.

Yes, Canada’s tariffs went up to 35% and Mexico’s were postponed at 30%. But Canada has been exempted from energy tariffs; Mexico has not. Canada also mobilized its lobbying power in Congress and with state governors. This work secured bipartisan legislation in the Senate to roll back tariffs imposed on Canada by the Trump administration, and another piece of legislation exempting small businesses from tariffs on Canadian products. With Mexico, zilch. Most importantly, Trump’s letter to the Canadian prime minister explicitly stated that Canadian exports meeting USMCA rules of origin would be excluded from the new tariffs. In a decision that reveals the White House’s attempt to maintain negotiating pressure on Mexico, Trump’s letter to Sheinbaum said no such thing.

While Mexico’s current 25% tariffs do include that exception, there is however no public guarantee said exception will remain in force when the hike to 30% comes due (even though, in private, there seems to be such a tacit agreement). This ambiguity injects uncertainty into markets and diplomacy alike at a time when certainty and predictability are sorely needed. The coup de grâce, meanwhile, is that the 90-day postponement ensures that tariff negotiations will overlap with the USMCA renegotiation Trump intends to force, and likely starting this fall. Mexico will then be stuck in two negotiations at once: tariffs tied to fentanyl and crime, plus those on autos, steel, aluminum, and copper — and the USMCA review/renegotiation itself.

The second half of the year looks daunting for Mexico. If on top of everything else the US increases pressure for action against politicians tied to organized crime or money laundering (likely) — or even a unilateral armed drone strike on Mexican soil (plausible) — the bilateral relationship could fall into a dizzying downward spiral. And as a corollary: if the relationship really is going as well as officials both in Mexico City and Washington constantly emphasize, I don’t want to imagine how things would look like if it started to go badly!