Trade war is defined as a situation in which two or more countries do damage to each other’s trades by raising import tariffs or imposing restrictions on the other countries’ import. Trade wars are typically seen as a side effect of protectionism – a political stance that seeks to shield domestic industries and guard the home job market from foreign workers. In April 2019, US President Donald Trump, known for his protectionist tendencies, started a trade war with its Southern neighbor – Mexico.
The motivation for this bout of restrictions was Mexico’s alleged unwillingness to cooperate with the United States in controlling migration flows from the Central block, which was seen as a threat to the US national security (Tajitsu & Prodhan, 2019). As a result, President Trump threatened to raise the import tariffs on automobiles up to 25% if Mexico continues to give migrants free passage.
Even though at first, some experts did not consider Trump’s promises feasible, it seems that he might as well use leeways in the current legislation to slowly but steadily raise the tariffs. However, it seems that the planned sanctions might as well hurt the United States more than the opposing country. In particular, the new policies might be detrimental to US automakers that have factories in Mexico and enjoy lower labor costs.
The statistics confirm the hypothesis: for instance, in 2018 alone, the US imported $93 billion worth vehicles from Mexico, which surpassed any other kind of good (Office of the United States Trade Representative, 2019). As many as 22% of GM and 10% of Ford vehicles were manufactured in Mexico (Office of the United States Trade Representative, 2019). Therefore, it is safe to say that Mexico plays an integral role in the US automotive industry.