Scott Ball / Rivard Report
The escalating crisis with Mexico triggered by the Trump administration in its first days in office has quickly reverberated across the country to South Texas and San Antonio where the region’s culture and economy are inextricably bound to cross-border travel, commerce, and trade.
The Trump administration’s move to convert campaign rhetoric into political action has led to executive orders signed by the new president ordering a multi-billion border wall, a dramatic buildup in Border Patrol forces, a crackdown on illegal immigration, and renegotiation of the North American Free Trade Agreement (NAFTA).
Many of San Antonio’s political and business leaders are declining to speak publicly about San Antonio’s dependence on good relations with Mexico for fear of incurring Trump’s wrath, but privately there is growing concern over the long-term impact of the president’s populist policies on the booming cross-border economy.
On Thursday, the rift between the two countries became more pronounced after Mexican President Enrique Peña Nieto said Mexico will not pay for a multi-billion border wall between the two countries, despite Trump’s declarations to the contrary. The Mexican president then canceled a scheduled trip next Tuesday to Washington, leaving no doubt the bilateral relationship had somehow devolved into a tense standoff in the space of days for no good reason.
Hours later on Thursday, Trump administration officials announced plans to implement a 20% tax on all Mexican imports into the United States to pay for the border wall, not realizing, perhaps, that such a tax would negatively impact the price of everything sold in H-E-B stores south of the border and Toyota Tundras and Tacoma pickup trucks manufactured and assembled here.
Less than one week in office, Trump had somehow ignited a war with America’s second largest trading partner, stunned local officials said, creating immediate uncertainty about the future relationship between the two countries.
Here in San Antonio, the effects will be felt directly, said Free Trade Alliance President José Martinez. Valero, H-E-B, and Toyota are only a few of the companies in San Antonio that have cross-border business and that would suffer.
“We are absolutely, extremely concerned,” Martinez said. “At this point, it would affect our economy. A lot of Toyota’s content comes from Mexico, and Valero buys a lot of crude oil from Mexico for their refineries, so the import tax on that would be substantial.”
H-E-B trades daily with Mexico, Martinez added, which could make groceries more expensive for San Antonians.
If Congress decides to back Trump’s 20% tax increase on Mexican goods and NAFTA gets thrown to the curb, the U.S. economy – and particularly Texas – will be negatively affected. According to the U.S. Census, Texas imports more from Mexico than any other country.
“San Antonio’s close relationship with Mexico has brought economic opportunity and growth to the region and Texas as a whole,” San Antonio Economic Development Foundation (SAEDF) CEO Jenna Saucedo-Herrera stated in an email. “Mexico is Texas’ largest trading partner, with over $84 billion in imports and $92 billion in exports in 2015.”
Texas’ economy has already sunk from 3rd to 21st under Republicans Greg Abbott and Dan Patrick, according to Texas Democratic Party Executive Director Crystal K. Perkins.
“Texas’ working families and our economy depend on a strong relationship with Mexico,” Perkins said in a statement. “Minority President Donald Trump’s 20% tax will kill Texas jobs, raise the price of goods for Texas families, and slaughter Texas’ relationship with its largest trading partner. Texas Democrats cannot and will not let Trump Republicans drag Texas families down. The time for Republican Governor Abbott and Lt. Governor Dan Patrick to stop cowering before Trump and defend our economy is now.”
The United States and Mexico have always relied on one another for trade and business, San Antonio Hispanic Chamber of Commerce CEO Ramiro Cavazos told the Rivard Report on Wednesday.
“NAFTA has been economically successful for Canada, the United States, and Mexico, creating a strong trading block with the rest of the world,” Cavazos said.
Cavazos said he favors a review of the trade agreement and updating it, as long as it will strengthen the relationship between Mexico and the U.S.
“We’re very concerned that economically we continue to hear this isolationism approach by the new administration, which is very dangerous,” he said. “Limiting the connections between our country to the rest of the world is really going to damage our nation’s economy and the relationships we have with our neighbors are going to be further weakened.”
More than the promise of the wall and the nervousness surrounding NAFTA, it is the tone of the negotiations that threatens the peaceful relationship between both countries, said Raúl Rodríguez Barocio, a San Antonio resident and the chairman of the New York-based U.S.-Mexico Foundation.
Rodríguez, who has a long and distinguished career in international affairs, said in a Thursday phone interview that if the U.S. wants to renegotiate NAFTA it must do so intelligently and with a different tone. If there is no benefit for Mexico, he said, Mexican leaders “will not come to the table.”
“What is worrisome here is that all these vague declarations generate reactions from reasonable people that could lead to unreasonable decisions,” Rodríguez said. “It is creating a snowball effect and could lead to its cancellation, which could open up a Pandora’s box.”
Ruben Linder, president for the Asociación de Empresarios Mexicanos (AEM) in San Antonio told the Rivard Report Wednesday that NAFTA remains important for both countries. Linder said the AEM, which promotes business opportunities for Mexicans in the United States and for U.S. individuals and companies seeking to do business in Mexico, will continue to create opportunities for both sides.
“NAFTA is important for both countries, and you can’t deny the billions of dollars that cross the border,” Linder said. “Mexico needs to find a good negotiation that is convenient and a win-win for both countries.”
Martinez said Trump feels NAFTA is not a mutually beneficial trade deal.
“He doesn’t feel it’s a fair agreement, and that Mexico has prospered and become a developed country, which was one of the intentions, but to the point that now we have a 50-60 trade imbalance,” Martinez said. “They have a surplus and we have a deficit. He’s looking at how to fix that and make it a fairer agreement.”
Trump’s actions should not come as a surprise, Martinez said. After all, the business mogul made these political promises as he toured the Rust Belt during his campaign and focused on bringing back jobs from the developing world and reopening shuttered factories.
“San Antonio is a free trade city and we are the largest city in the U.S. that gave unconditional support to NAFTA 25 years ago, but we also believe in fair trade and things are a little bit out of whack,” Martinez added. “[Trump] wants to make sure that America is not losing ground … NAFTA needs to be updated and there are a lot of new things that need to be looked at.”
Martinez is confident an agreement will be made, one that he hopes will be mutually beneficial.
Rodríguez believes that there has been a lack of emphasis on the importance of NAFTA in the last 25 years, and that this is one of the reasons why the conversation “has become so polarized and irrational.”
The problem at the core of job creation is not free trade, but new technology that has made certain jobs obsolete, Rodríguez said, something that he thinks Trump and other candidates failed to acknowledge during the U.S. presidential campaign.
“There are certain industries that won’t survive, independently if you close the border and put a wall, it’s about the changes in advanced technology,” he said. “You either modernize or you disappear. Uber and Amazon, for example, have changed the way of conducting business in several ways and old models of doing business in these sectors are disappearing – but you won’t recover those jobs with taxes on imports.”
More importantly, recent rhetoric threatens to shatter a 30-year friendship with Mexico that was further strengthened after the end of the Cold War. Mexico has been an ally, neighbor, and partner on many issues, including natural disasters. Back in 2005, the Mexican Army marched across the border to San Antonio in order to help evacuees devastated by Hurricane Katrina. Many local leaders have said that this is only one of many examples.
Rodriguez also is worried about bigger problems that could stem from Trump’s recent unfriendliness to the U.S.’s southernmost neighbor.
“We need to look at the geopolitical situation in general,” Rodriguez said. “What is the impact of this in Mexican politics and how will this affect us? It’s already complicated as it is, and all of this will have a very direct impact on [the upcoming election in Mexico in 2018].”
Rodríguez said that when it comes to the struggles of the U.S. economy, what we have right now is a very incomplete dialogue for a very real problem, which is mostly due to a globalized economy based on technology that is rapidly changing.
“Putting up barriers is not the solution,” Rodríguez said. “I say this historically. At the beginning of the 30s, barriers were put on imports and this created trade wars all over the world, which only made things worse.”