Latest / Trumponomics / Mexico’s High-Stakes Gamble in Dealing With Trump

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Mexico’s High-Stakes Gamble in Dealing With Trump · Trumponomics

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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
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Speaker 2: I'm Stephanie Flanders, head of Government and Economics at Bloomberg,
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Speaker 2: and this is trump Anomics, the podcast that looks at
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Speaker 2: the economic world of Donald Trump, how he's already shaped
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Speaker 2: the global economy, and what on earth is going to
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Speaker 2: happen next. Well, this week we're looking at how the
0:34
Speaker 2: country with the most to lose from Donald Trump's trade
0:37
Speaker 2: wars is trying quietly to win them. In the world
0:41
Speaker 2: of Donald Trump, you don't always want to be where
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Speaker 2: the action is. As I record this on Tuesday, twenty
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Speaker 2: eighth of October, most eyes are on Asia as the
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Speaker 2: President tours the region, making deals and headlines wherever he goes,
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Speaker 2: and at least as of now, he'll be meeting the
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Speaker 2: Chinese president later in the week to seal what is
1:00
Speaker 2: already been billed as a great victory in his trade
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Speaker 2: war with that country. In fact, it's China who probably
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Speaker 2: now has the upper hand in that conversation and future ones.
1:10
Speaker 2: And if you want to understand why, just listen to
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Speaker 2: the last episode of Trumpnomics with Arthur Kroeber. So instead,
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Speaker 2: my focus this week is on a country which has
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Speaker 2: largely avoided the headlines since President Trump came back to
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Speaker 2: the White House, but as one of America's largest trading partners,
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Speaker 2: has arguably even more at stake than China and a
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Speaker 2: lot weaker cards. Mexico sends a whopping eighty three percent
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Speaker 2: of its exports to the US on some measures, and
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Speaker 2: every time the President talks about blanket tariffs on the country,
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Speaker 2: its economy shudders. Yet somehow that hasn't happened. There have
1:44
Speaker 2: been continual reprieves, and most of the credit goes to
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Speaker 2: Mexico's President, Claudia Scheinbaum, now entering her second year. So
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Speaker 2: how exactly has Mexico's first female president navigated the Trump
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Speaker 2: era so skillfully? And what's at stake in her continuing
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Speaker 2: to pull it off? Those are the questions we're answering
2:07
Speaker 2: in this episode, And because we're Bloomberg Economics, we've brought numbers.
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Speaker 2: By our estimate, the difference for Mexico, for President Chinbaum
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Speaker 2: between managing this right and managing it wrong over the
2:19
Speaker 2: next few years, we Reckon comes down to more than
2:22
Speaker 2: four thousand dollars worth of additional economic growth for every man, woman,
2:27
Speaker 2: and child in Mexico between now and twenty thirty. It's
2:30
Speaker 2: on the good scenario, Mexico could even end up growing
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Speaker 2: faster than the US for the first time since two
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Speaker 2: thousand and eight. Probably won't want President Trump to notice that,
2:40
Speaker 2: but as we're going to be hearing, that rosy outcome
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Speaker 2: is indeed far from guaranteed, So let's get into it.
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Speaker 2: Alex Vasquez is one of our economy and government reporters
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Speaker 2: in Mexico City joining me now.
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Speaker 1: Alex, welcome, thank you, thank you for having me.
2:55
Speaker 2: And in New York's Felipe Hernandez, who covers Latin America
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Speaker 2: for US at Bloomberg Economy. He's got more than fifteen
3:01
Speaker 2: years experience covering Latin America for Bloomberg, but also at
3:04
Speaker 2: firms including Banco Santander and Deutsche Bank. I think it's
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Speaker 2: the first time for both of you. How has it
3:18
Speaker 2: taken me so long? I guess that's another sign that
3:20
Speaker 2: Mexico has quite happily been staying out of the headlines
3:23
Speaker 2: over the last few months. Alex, remind us where we
3:28
Speaker 2: are in the negotiations between the US and Mexico. As
3:31
Speaker 2: I mentioned, it seems like no news has been good news.
3:35
Speaker 3: Yeah, I think shambong has managed to I think the
3:40
Speaker 3: big achievement is to stay away of confrontation with Trump.
3:45
Speaker 3: She doesn't speak much, and I think that something Trump appreciates,
3:51
Speaker 3: and she has given him what he wants. She has
3:54
Speaker 3: helped to stop migration by sending the National Guard to
3:58
Speaker 3: the border. She has handed the US some important drug
4:04
Speaker 3: traffickers that were.
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Speaker 1: Jailed in Mexico.
4:06
Speaker 3: Right now, Mexico I think is the best country position
4:12
Speaker 3: regarding tariff and regarding trade with the US because even
4:16
Speaker 3: compared with Canada, which is also part of the US
4:19
Speaker 3: Mexico and Canada trade agreement, I think Mexico doesn't have
4:24
Speaker 3: like reciprocal tariff. It only has twenty five percent tariff
4:28
Speaker 3: related to fentannel trafficking, but most of the Mexican goods
4:33
Speaker 3: are free of tariff thanks to the trade deal. So
4:36
Speaker 3: she has managed to do pretty well. Canada has higher tariff.
4:41
Speaker 3: And she announced in a press conference that we had
4:45
Speaker 3: a deadline for November first to race tariff in Mexico,
4:49
Speaker 3: and she announced that it was extended again.
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Speaker 4: I spoke with President Trump on Saturday, and we are
4:58
Speaker 4: going to give it a few more weeks to be
4:59
Speaker 4: a able to close the issue that is already very
5:02
Speaker 4: advanced regarding the fifty four non tariff barriers. So we
5:07
Speaker 4: agree to speak again in a week or so because
5:10
Speaker 4: we are practically already closing this issue, because ultimately on
5:14
Speaker 4: November one, that deadline closes that we had both set
5:19
Speaker 4: for ourselves.
5:21
Speaker 3: Trump has mentioned that he has a lot of respect
5:23
Speaker 3: for her, and you can tell that when she is
5:27
Speaker 3: the one that announces in a press conference that they
5:31
Speaker 3: had a phone conversation and they reach a deal to
5:34
Speaker 3: continue negotiating, but that means no more tariff. So I
5:40
Speaker 3: guess the big win is never engaged in a confrontation
5:43
Speaker 3: and she never retaliated with tariff from Mexico. But obviously
5:48
Speaker 3: there's a lot at stake because Mexico sends to the
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Speaker 3: US more than eighty percent of it.
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Speaker 1: Techsp so she has to have a good relationship with Trump.
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Speaker 2: I mean, we do tend to think about this and
6:00
Speaker 2: terms of a sort of balance of power and some
6:03
Speaker 2: of the countries, certainly the countries with very little leverage.
6:06
Speaker 2: I'm thinking of some African economies and others that are
6:08
Speaker 2: facing very high reciprocal tariffs. That does seem to be
6:12
Speaker 2: about America sort of using its raw force to impose
6:18
Speaker 2: things on other countries. Whereas we pointed out last week
6:21
Speaker 2: with China, China has been very good at using the
6:23
Speaker 2: leverage it has. It's particularly its control over these key
6:27
Speaker 2: parts of the global supply chain, these rare earth magnets.
6:30
Speaker 2: If you look at Mexico on the face of it,
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Speaker 2: you know it has It's a much smaller economy, has
6:35
Speaker 2: much less to bring to the table, and these negotiations,
6:39
Speaker 2: you say, she's given him everything he wants, but she
6:42
Speaker 2: hasn't given him anything on the trade front, which is
6:45
Speaker 2: obviously the most important for Mexico. Are there hidden forces
6:48
Speaker 2: that are tipping the balance economically in favor of Mexico
6:51
Speaker 2: in these negotiations? How has she managed to have this
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Speaker 2: ongoing reprieves where you know we're in China. They had
6:58
Speaker 2: to actually threaten all this.
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Speaker 3: Other have to get that Mexico is next to the
7:03
Speaker 3: US and both economy are highly integrated. Sometimes to make
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Speaker 3: a car or even an auto part, the same piece
7:13
Speaker 3: goes through the border several times. So I think a
7:17
Speaker 3: lot of US companies have operations in Mexico.
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Speaker 1: We know the labor force is cheaper here.
7:24
Speaker 3: Mexico has a pretty good manufacturing so I think Trump
7:29
Speaker 3: has faced a lot of pressure.
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Speaker 1: From different interests in the US.
7:34
Speaker 3: They pretty much don't want to have bad relationship with
7:39
Speaker 3: Mexico because there's a lot of economic interests in Mexico.
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Speaker 2: Does she ever talk about that, Does she ever say
7:45
Speaker 2: speak directly to these big car manufacturers and others highlight
7:50
Speaker 2: the stake orders she just letting them do the talking.
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Speaker 3: Yeah, I mean she always mentions like, we have great
7:57
Speaker 3: car manufacturers in Mexico. Even US companies are here for
8:01
Speaker 3: general motors.
8:03
Speaker 1: They have big plants here in Mexico.
8:05
Speaker 3: So it's not that easy to move production to the
8:08
Speaker 3: US in four years or in a year. So I
8:11
Speaker 3: guess a lot of people in the US know that,
8:14
Speaker 3: and that's why he's getting in the pitch. It sounds
8:18
Speaker 3: good the companies are coming here and they're living in
8:20
Speaker 3: other countries, and we're going to produce more in the US.
8:23
Speaker 3: But in reality, you need to have factories in Mexico,
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Speaker 3: and she knows that. I guess that's her leverage. Even
8:31
Speaker 3: if he wants to. It's not that easy to move
8:33
Speaker 3: that production to the US in one, two or three
8:36
Speaker 3: four years.
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Speaker 2: So Philippe, we were quite interested in what was at
8:40
Speaker 2: stake for Mexico over the next few years in managing
8:45
Speaker 2: to dodge this particular bullet and did get some of
8:48
Speaker 2: her other policies right. And you've helped Bloomberg reporters Alex
8:53
Speaker 2: and others rise a big piece that's coming out about
8:56
Speaker 2: Mexico being at a half trillion dollar crossroads. So talk
9:00
Speaker 2: us through a little bit how much is at stake
9:02
Speaker 2: for Mexico in the next few years.
9:04
Speaker 5: Well, as you mentioned, we started by saying or acknowledging
9:09
Speaker 5: that Shane Bound has been forced to deal with two
9:13
Speaker 5: very strong forces, one external which is dealing with all
9:17
Speaker 5: of Trump's immigration, security, and trade policies, and one which
9:23
Speaker 5: is domestic, which is Shane bum having to deal with
9:26
Speaker 5: Amulo's legacy and am lost legacy has to do with
9:29
Speaker 5: his social programs.
9:30
Speaker 2: As a previous the previous president Lorador, who is known as.
9:34
Speaker 5: That correct so she has had to deal with what
9:37
Speaker 5: he left, which were big social programs and state centric
9:42
Speaker 5: economy and a couple of reforms that have concentrated power
9:47
Speaker 5: in the executive branch and taking out away some power
9:51
Speaker 5: from both Congress and more recently the judiciary power. The
9:56
Speaker 5: exercise that we did was look at different scenario about
10:01
Speaker 5: where with the Mexican economy would be five years from
10:05
Speaker 5: now under different assumptions. One assumption would be a positive
10:11
Speaker 5: scenario that would be an a scenario in which Mexico
10:14
Speaker 5: manages to avoid higher tariffs on its exports to the
10:19
Speaker 5: US and in which President Shambaum implements economic policies that
10:25
Speaker 5: are more market friendly than those implemented by her predecessor,
10:30
Speaker 5: President Lopez o Dador. And a negative scenario in which
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Speaker 5: Mexico ends up with tariffs that are in line with
10:39
Speaker 5: those with the reciprocal tariff in post on other countries,
10:43
Speaker 5: so that's an reciprocal tariff on ten percent on top
10:46
Speaker 5: of the twenty five percent Sentennil related tariff, and in
10:50
Speaker 5: which President Shambaum implements domestic economic policies in line with
10:56
Speaker 5: those that were implemented during the term of Lopezo or
11:00
Speaker 5: in power. And the results that we found is that
11:03
Speaker 5: assuming that an average economic growth in the US of
11:06
Speaker 5: around two percent over the next five years, Mexico would
11:10
Speaker 5: grow by an average two point two percent every year,
11:13
Speaker 5: so slightly above US growth that by the end of
11:17
Speaker 5: that five year forecast period would imply that Mexico's GDP
11:20
Speaker 5: would be roughly four point eight, almost five percentage points
11:24
Speaker 5: higher than in their status school a scenario. On the
11:27
Speaker 5: other hand, if Mexico winds up with reciprocal tariffs and
11:33
Speaker 5: economic policies that are fairly rated as market and friendly,
11:38
Speaker 5: then average economic growth over this five year period could
11:41
Speaker 5: be close to zero, and Mexico's economy by the year
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Speaker 5: of twenty and thirty would be almost six percentage points
11:49
Speaker 5: lower than otherwise.
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Speaker 2: Basically, it's a choice between going up and going down
11:53
Speaker 2: in a very sophisticated economic way, and the difference in
11:56
Speaker 2: terms of additional growth is half a trillion dollars we
12:00
Speaker 2: should say, I mean, so, although she's managed to avoid
12:02
Speaker 2: the headlines, we do still have this uncertainty hanging over
12:06
Speaker 2: the economy thanks to these sort of continual reprieves, but
12:10
Speaker 2: also the times where the president decides to talk tough.
12:13
Speaker 2: If he's still talking about these blanket tariffs, that uncertainty
12:17
Speaker 2: must be pretty corrosive for the economy right now. Can't
12:21
Speaker 2: carry on in definitely.
12:22
Speaker 5: Like this absolutely, And actually when you look at the
12:25
Speaker 5: figures for economic activity and the exports so far this year,
12:31
Speaker 5: when people think about tariffs, they always think about what
12:34
Speaker 5: will happen with trade and exports. When you look at
12:38
Speaker 5: the exports numbers so far this year for Mexico, they
12:42
Speaker 5: show that despite tariffs the fantany related tariffs imposed by
12:47
Speaker 5: the US administration, exports to the US are still growing
12:51
Speaker 5: and are still growing at a healthy pace. I would
12:54
Speaker 5: say the real big negative impact so far on the
12:59
Speaker 5: Mexican economy from tariffs has been on the investment side,
13:04
Speaker 5: and that is actually exactly in line with the point
13:07
Speaker 5: that you are making, and is the drag from this
13:11
Speaker 5: uncertainty about what will happen with trade and tariffs in
13:16
Speaker 5: the future, and how that has forced a lot of
13:20
Speaker 5: companies that had investment plans in Mexico to put those
13:23
Speaker 5: on hold. And there's a lot of companies with projects
13:28
Speaker 5: that they are ready to start deploying that have decided
13:32
Speaker 5: to just wait and see until they have real clarity
13:35
Speaker 5: about what is going to happen in the bilateral relations
13:39
Speaker 5: and bilateral trade between the two governments and.
13:54
Speaker 2: Felipe. If you just look at the way things have
13:58
Speaker 2: gone this year and the way that President Chinbaum has
14:01
Speaker 2: managed to navigate this so far, would you say the
14:05
Speaker 2: friend shoring model was still alive and you wouldn't count
14:08
Speaker 2: it out just on the basis of what actually happened
14:11
Speaker 2: this year, as opposed to just the rhetoric of Donald Trump.
14:14
Speaker 5: Yeah, I would say that there's a big pipeline of
14:17
Speaker 5: investment projects, a lot of them that were born under
14:21
Speaker 5: the mere shoring boom and all of the expectations about
14:25
Speaker 5: how Mexico could benefit from these There's a lot of
14:28
Speaker 5: these projects that are now on hold. I would say
14:32
Speaker 5: that they are still on hold. They have not been
14:36
Speaker 5: completely ruled out. And basically what many of the companies
14:41
Speaker 5: that have these projects are waiting is for some clarity
14:44
Speaker 5: regarding what is going to happen going forward in the
14:47
Speaker 5: bilateral relations between Mexico and the US. As soon as
14:50
Speaker 5: they have some clarity about that, they will make a
14:53
Speaker 5: decision if they want to go ahead with these projects
14:57
Speaker 5: or not. And I would say that going to ahea
15:00
Speaker 5: head with these projects doesn't necessarily imply that Mexico will
15:04
Speaker 5: not face some tariffs on their exports to the US.
15:09
Speaker 5: There's a lot of projects that as long as Mexico
15:11
Speaker 5: has more attractive tariffs than the rest of the world,
15:16
Speaker 5: including Canada, will imply that maybe Mexico will end up
15:21
Speaker 5: seeing the influence and the investment flows tied to those
15:24
Speaker 5: projects as long, of course, as those tariffs also leave
15:29
Speaker 5: Mexico in a position where it makes more sense for
15:32
Speaker 5: the companies to invest in Mexico than in the US.
15:36
Speaker 5: But given the differences in costs mainly labor costs, but
15:41
Speaker 5: other costs as well, these are some projects that I
15:45
Speaker 5: would say are still viable even with some tariffs in place,
15:49
Speaker 5: which I think it's likely to be the final outcome
15:52
Speaker 5: of all of these. But to answer your question, it
15:55
Speaker 5: means that, yes, Mexico is in a position where a
15:58
Speaker 5: lot of these near shoring projects would still be developed.
16:02
Speaker 2: Alex I'm interested in how this is going down with
16:05
Speaker 2: the Mexican public because President Scheinbam's got another five five
16:10
Speaker 2: more years, so she's got a while. But you started
16:14
Speaker 2: the podcast by saying she's given the president everything he wants.
16:18
Speaker 2: Is there a perception that she's played this well or
16:21
Speaker 2: that has been to quiet and meek with regard to
16:24
Speaker 2: the president house her popularity.
16:26
Speaker 3: She's entering her second year and she remains highly popular.
16:30
Speaker 3: She has more than seventy percent of approval ratings. Sometimes,
16:35
Speaker 3: according to some pools, around eighty percent of appro rating it's.
16:40
Speaker 2: Quite a lot more popular than President Trump or In
16:43
Speaker 2: or indeed most other leaders.
16:46
Speaker 1: Yeah, even then Lopezo with at all, which is crazy, right.
16:49
Speaker 3: So I guess she has managed to have two speeches.
16:53
Speaker 3: One for the US public, the economy is the politicians,
16:58
Speaker 3: where she's discussing these tray issues. She's pretty much recognizing
17:03
Speaker 3: that she has to have a good relationship with Trump,
17:07
Speaker 3: But she also has another speech for the base that's
17:10
Speaker 3: pretty much Mexico is a sovereign country. The US will
17:14
Speaker 3: never enter Mexico to try to dismantle fentany or laboratories,
17:19
Speaker 3: or to detain drop traffickers or stop migration. She's very careful,
17:25
Speaker 3: and we can see that when she's doing like a
17:28
Speaker 3: rally in a state around the country. She goes to
17:31
Speaker 3: this speech and that goes pretty well with the base.
17:34
Speaker 3: I'm not trying to assume that the base don't understand
17:38
Speaker 3: what she's doing.
17:39
Speaker 1: They do.
17:40
Speaker 3: And when you talk to people that tell you she
17:43
Speaker 3: has handled from pretty well.
17:45
Speaker 1: The pesto is good, the pestot.
17:47
Speaker 3: Is stronger, we don't have more tariff. She's raising the
17:51
Speaker 3: minimum ways and that kind of stuff. We're getting the pension.
17:55
Speaker 3: So people see that. I guess they're happy, and.
17:58
Speaker 2: A small philosophical question. It's not a question at all. Ever,
18:01
Speaker 2: since NAFTA, which is now more than thirty years ago,
18:06
Speaker 2: the country has made a bet on being closer and
18:08
Speaker 2: closer to the US, and as you described, alex the
18:11
Speaker 2: integration of the supply chains has probably gone further than
18:14
Speaker 2: anyone might have expected back in back when that treaty
18:18
Speaker 2: was signed. These days we talk a lot about countries
18:22
Speaker 2: looking to diversify, being concerned about the US being so
18:26
Speaker 2: uncertain on being an unreliable ally these constant threats. He
18:31
Speaker 2: seems to be particularly rude, often to his friends. Is
18:34
Speaker 2: anyone questioning that? I mean, you would look at Mexico
18:37
Speaker 2: and say, wouldn't be so bad to be a bit
18:40
Speaker 2: more diversified in your exports, to not be so dependent
18:43
Speaker 2: on the US. But is that even an option for Mexico.
18:47
Speaker 3: In a normal scenario, this will be an option. But
18:51
Speaker 3: we're in a moment that you just cannot upset Trump.
18:55
Speaker 3: Mexico is improving a free trade deal with the European Union,
19:00
Speaker 3: working on that. They're trying to have more cooperation and
19:03
Speaker 3: more trade with Brazil, for example, which is a huge country.
19:06
Speaker 1: But they're pretty shy about it.
19:09
Speaker 3: Even Canada McCartney has sent to Mexico his main minister
19:13
Speaker 3: is trying to reach a better bilateral deal between both
19:17
Speaker 3: countries to be stronger for training negotiations. And what has
19:22
Speaker 3: been the US response has been like, maybe the USMCA
19:27
Speaker 3: negotiation will be bilateral instead of trade lateral, because he
19:31
Speaker 3: knows that they're stronger together. So I guess that's one
19:35
Speaker 3: of the complicated issues. Everybody knows that Mexico should diversify
19:39
Speaker 3: its economy. I think the government is trying. It's being shy,
19:43
Speaker 3: but it's trying. But it's hard because if you're sending
19:47
Speaker 3: eighty percent of your experts and you're a manufacturing country,
19:50
Speaker 3: you cannot upset your northern neighbor.
19:53
Speaker 2: If you allow me.
19:54
Speaker 5: Adding one more thing about that, and is that yes,
19:57
Speaker 5: as Alex mentioned, government officials and people in Mexico would
20:01
Speaker 5: like to have a better diversified trade, as you mentioned,
20:06
Speaker 5: and as Alex was explaining, it's now probably not the
20:09
Speaker 5: best time to do it. And there's like serious worries
20:14
Speaker 5: about what would happen to Mexico if you jeopardize at
20:17
Speaker 5: all the trade relations with the US. And because of
20:21
Speaker 5: all of those constraints and concerns. Actually, along with the
20:25
Speaker 5: budget for twenty twenty six, the government submitted the proposal
20:29
Speaker 5: to impose tariffs on imports from China and other countries
20:34
Speaker 5: into Mexico. Countries with which Mexico doesn't have a free
20:38
Speaker 5: trade agreement.
20:39
Speaker 2: Was that far after US pressure? Do you think? What
20:41
Speaker 2: do you think was driving now?
20:43
Speaker 5: It's well known that the US, as part of negotiating
20:47
Speaker 5: with Mexico, wants to make sure that Mexico implements some
20:53
Speaker 5: trade barriers with China in order to make sure that
20:56
Speaker 5: China is not used in Mexico and third countries to
20:59
Speaker 5: serve convent the tariffs that the US has imposed on China.
21:04
Speaker 5: There's a lot of talk and actually some evidence that
21:07
Speaker 5: shows that exports from China to Mexico have sharply increased
21:12
Speaker 5: in the last couple of years, which coincides with the
21:15
Speaker 5: increasing US tariffs on imports from China, and that has
21:20
Speaker 5: all inspired or points to some triangulation of exports from
21:26
Speaker 5: China through Mexico that finally end up in the US
21:29
Speaker 5: to avoid US tariffs. The US is aware of these
21:32
Speaker 5: and has asked to Mexico to take steps in order
21:36
Speaker 5: to prevent these and the initiative for Mexico to impose
21:40
Speaker 5: tariffs on their imports from China is pretty much aligned
21:43
Speaker 5: with that. I think is part of Mexico's attempt to
21:48
Speaker 5: have something to show to the US about their willingness
21:51
Speaker 5: to cooperate and their hope that with steps like those,
21:58
Speaker 5: they are showing the commitment that they have to have a
22:00
Speaker 5: lateral relationship with the US, and then they are willing
22:03
Speaker 5: to compromise in order to secure that the free trade
22:07
Speaker 5: agreement with next with the US will remain in place
22:10
Speaker 5: once it's reviewed next year.
22:13
Speaker 3: And I'm glad philipp mentioned that, if I may it,
22:16
Speaker 3: because she sent this proposal to Congress. We're talking about
22:21
Speaker 3: like more than a thousand categories of products, including steel, toys, textiles, shoes,
22:28
Speaker 3: you name it. We have a lot of stuff, but
22:31
Speaker 3: this you would expect that Congress would pass it like
22:34
Speaker 3: right away because they have the majority. They decided to
22:37
Speaker 3: delay the discussion, and I've been talking to several lawmakers
22:42
Speaker 3: from the ruling party, and I guess this is when
22:44
Speaker 3: you know these old school groups from Lopezo re Alora,
22:49
Speaker 3: they're not that happy to raising tariffs on China because
22:54
Speaker 3: they want to have a good relationship.
22:55
Speaker 2: You CUsing off your options.
22:57
Speaker 3: Yeah, that's right, and they want to keep a good
22:59
Speaker 3: relationship China. So this is a perfect example that maybe
23:04
Speaker 3: she doesn't have a strong real opposition, but within the party,
23:08
Speaker 3: she's not breed to do whatever she wants. So they're
23:11
Speaker 3: discussing this, trying to move the numbers a little bit.
23:14
Speaker 3: So this doesn't look too bad for China. Still pleases
23:19
Speaker 3: strump So that's the balance.
23:21
Speaker 2: Both of you. Just very quickly, if people who are
23:24
Speaker 2: not tuning in to Mexico very often, maybe occasionally see
23:28
Speaker 2: President Scheinbaum come in a viral clip when she's talking
23:32
Speaker 2: about the Gulf of Mexico versus the Gulf of America.
23:36
Speaker 2: Are their potential flash points in the next few months
23:38
Speaker 2: that we should look at, because we've talked about a
23:40
Speaker 2: very narrow line that she has to walk between some
23:43
Speaker 2: of this kind of internal opposition, not very much, but
23:46
Speaker 2: some concern and instincts versus the pressure from the US
23:53
Speaker 2: and the vital importance of that trading relationship. What are
23:56
Speaker 2: the things to watch out for over the next few
23:59
Speaker 2: months to know how this is going to go.
24:02
Speaker 5: I would pay attention to two things, or basically one
24:05
Speaker 5: acknowledging that the external front is very important. But on
24:10
Speaker 5: that front, the final decision really or I would say
24:16
Speaker 5: seventy five percent of the decision or the outcome on
24:19
Speaker 5: that front is not under shame Baum's control, but on
24:22
Speaker 5: the White House and President Trump. So yes, keep an
24:25
Speaker 5: eye on that, but be aware that Trump is still
24:28
Speaker 5: probably the one that will decide the end result of that,
24:31
Speaker 5: with some input from Shameebaum, and of course a lot
24:35
Speaker 5: based on how Shaanebaum deals with Trump, which until now
24:38
Speaker 5: she has done fairly well, and therefore I would assume
24:41
Speaker 5: she will continue to do. And I'll be not so
24:43
Speaker 5: worried about what Shamee Baum does about the trade relationship
24:46
Speaker 5: with the US, but more about what Trump does on
24:49
Speaker 5: that front. I would pay more attention to what Shane
24:51
Speaker 5: Baum says regarding domestic economic policies. How much shame Boum
24:57
Speaker 5: really moves away from the attack from her predecessor, Ovador
25:02
Speaker 5: attacks against the private industry and private investment. How at
25:07
Speaker 5: least from what we have seen so far, she keeps
25:09
Speaker 5: moving forward with a more market friendly economic policy framework,
25:15
Speaker 5: which is starting to generate a little bit more of
25:20
Speaker 5: confidence and optimism domestically among private investment investors. As long
25:26
Speaker 5: as she keeps moving in that direction, I would say
25:30
Speaker 5: investors and people that follow Mexico could be a little
25:33
Speaker 5: bit more optimistic about Mexico's outlook. And as we have
25:38
Speaker 5: discussed so far in this podcast, she still has to
25:43
Speaker 5: strike a balance between the more market friendly economic policies
25:48
Speaker 5: and those policies that her predecessor was implementing which were
25:53
Speaker 5: not that friendly, but that she needs to make sure
25:56
Speaker 5: that she keeps his support to make sure that Governori
26:01
Speaker 5: doesn't turn into an issue for her.
26:03
Speaker 3: Yeah, I agree with what Felipe is saying. I think
26:07
Speaker 3: in the external front, the only thing we should expect,
26:12
Speaker 3: probably for the next three years, is uncertainty. We don't
26:16
Speaker 3: know what's going to happen. I think markets are really
26:19
Speaker 3: pretty well what's going on. We're seeing the PESL very strong,
26:24
Speaker 3: the Mexican bonds, so I think the market is reading that.
26:28
Speaker 3: I think the current deal we have is good for Trump,
26:33
Speaker 3: That's why it hasn't changed. It seems like he came
26:36
Speaker 3: to power yesterday, but it's been almost a year, so
26:39
Speaker 3: I don't think things are going to change much for Mexico. Obviously,
26:44
Speaker 3: we have the free Trade review and we should keep
26:48
Speaker 3: special attention to that. But I agree with Philippe, we
26:52
Speaker 3: should pay special attention to the domestic front. And she's
26:55
Speaker 3: doing efforts to maybe not diversify the economy, but the
27:00
Speaker 3: endless on the US. She proposed in January, knowing what
27:04
Speaker 3: Trunk was going to do to create these development hobs.
27:08
Speaker 3: These are some development hubs in different areas in the
27:11
Speaker 3: country to attract investment.
27:12
Speaker 1: Since near sharing was low.
27:14
Speaker 3: In because everybody knew TRUP was going to win, she's
27:18
Speaker 3: giving tax incentives to foreign companies to invest in Mexico.
27:22
Speaker 3: I visited a couple and this is just empty land yet,
27:26
Speaker 3: so this shows a little bit that the investment are
27:29
Speaker 3: not here. So we should pay attention to what she's
27:32
Speaker 3: going to do to attract investment. And I think the
27:35
Speaker 3: key sector is energy. Mexico lacks energy, and if especially
27:41
Speaker 3: power generation and transmission, and if you want companies to come,
27:45
Speaker 3: we need to see more energy projects and we're not
27:48
Speaker 3: seeing that right now.
27:49
Speaker 1: So I guess that's the key.
27:51
Speaker 3: If she is able to attract investment, that's the only
27:54
Speaker 3: way to depend less on the US.
27:57
Speaker 2: I guess you should have to keep getting to the
27:58
Speaker 2: empty bit of ground, look for green shoots. Well, if
28:02
Speaker 2: anybody from a President Chinbaum staff is listening, or I
28:05
Speaker 2: do the President herself, she is more than welcome to
28:08
Speaker 2: come on Trumpnomics and explain exactly how she's going to
28:11
Speaker 2: navigate these difficult waters. I'm going to be in Mexico
28:14
Speaker 2: myself in early December. I'll be happy to go and
28:16
Speaker 2: see her anytime, any place. But in the meantime we
28:19
Speaker 2: have something almost as good. Filipe and Alex, thank you
28:22
Speaker 2: so much.
28:23
Speaker 1: Thank you, Stephanie, thank you too.
28:32
Speaker 2: Thanks for listening to trump Andomics from Bloomberg. It was
28:34
Speaker 2: hosted by me, Stephanie Flanders, and I was joined this
28:37
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28:42
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