Saturday, January 14, 2017

Mexico must be ready to retaliate if Trump levies border tax, says minister


Mexico’s economy minister, Ildefonso Guajardo, speaks to the media after a meeting with a Japanese businessman in Mexico City on Friday. Photograph: Carlos Jasso/Reuters

Mexico must be ready to respond immediately with its own tax measures if the incoming administration of President-elect Donald Trump imposes a border tax, the country’s economy minister has said, warning such protectionism may trigger a global recession.


Trump, who takes office on 20 January, has promised a “major border tax” on companies that shift jobs outside the United States, and such a measure could hobble Mexico’s exports to its top trading partner.

“It is clear we need to be prepared to immediately neutralise the impact of such a measure,” the economy minister, Ildefonso Guajardo, said in an interview on Mexican television.

“And it is very clear how – take a fiscal action that clearly neutralises it,” he said.

Trump has repeatedly attacked Mexico over trade, jobs and immigration since he first launched his run for the White House in 2015, driving the peso currency to historic lows and unnerving investors, especially in the auto sector.
Guajardo said Trump’s proposed tax “was a problem for the entire world” and that it “would have a wave of impacts that could take us into a global recession”.

Nonetheless, the minister said he expected foreign direct investment in Mexico this year to total about $25bn, with investment in the energy and telecommunications sectors expected to more than make up for the loss of a planned $1.6bn Ford Motor Co factory that the company said this month it is cancelling. Trump had strongly criticised the plan, but Ford said its decision was not the result of pressure from Trump.

Guajardo also praised the government of Japan and Toyota Motor Corp for their “reasonable” response to Trump’s threat to impose a significant border tax if the company does not stop making its Corolla model in Mexico for the US market. Toyota said last week the automaker has no immediate plans to curb production in Mexico.

“Toyota has 10 plants in the United States … and employs more than 130,000 Americans. If I were Mr Trump, I’d treat them with more respect,” Guajardo said.

He added that he expected total foreign direct investment during the six-year term of President Enrique Peña Nieto, which ends in late 2018, to average $30bn annually.

Guajardo has previously warned that US corporate tax cuts proposed by Trump, as well as the border tax, could undermine foreign investment in Latin America’s No 2 economy.

Mexico slapped a tax on US high-fructose corn syrup in the early 2000s after the United States refused to allow free trade in Mexican sugar. 


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