As of publication mid-day Saturday, Feb. 1, there has been no official announcement from Trump regarding tariffs on Mexican products.
I will avoid sharing my opinion in my column today regarding President Trump as a businessman, leader or politician. Whatever I would say here would result in half of readers enthusiastically agreeing with me and the other half most certainly harshly criticizing me. That’s not my intention here. What I can say with confidence is that I think Trump is a very shrewd and effective negotiator. Let me explain.
There are several different types of well-documented, effective negotiating strategies. However, over my nearly 30-year business career, I have often found that it is the person that is doing the negotiating that matters as much as the actual negotiating strategy. If the person on the other side of the table is (or appears to be) unwilling to compromise, very aware that they have a sizeable advantage, willing to walk away or willing to do something unthinkable or crazy, it makes for an extremely difficult negotiating situation for the other party.
Early in my career, I worked for a smaller-sized company that had annual revenue under US $200 million. We had a very large customer with annual revenue over US $20 billion — over 100 times larger than us! To make matters more complicated, this customer represented a very large percentage of our total revenue. Negotiations with this customer were a nightmare because they knew that at the end of the day, they could demand almost anything and we would have to give in. Unfortunately, the culture of that company was to extract whatever they could from their suppliers in nearly every negotiation. It was a true David versus Goliath situation every time a new deal came up — and sure, David can win once or twice, but not on a regular basis. They can and did get the best of us every chance they could. Some companies and their negotiating employees use this power lightly, respecting the smaller company — others do not.
A similar asymmetry exists between the U.S. and Mexico. The United States economy is almost 15 times larger than Mexico’s. Mexico sends nearly 80% of it’s exports to the United States. Talk about a David versus Goliath negotiation! To make matters more difficult for Mexico, Trump has demonstrated himself to be the type of negotiator who is willing to use any and all negotiating tools at his disposal to get what he wants. Needless to say, that puts Sheinbaum in a difficult spot. So how could this play out?
Trump is pushing Mexico in five key areas, each of which represent a negotiating opportunity for both sides. He wants Mexico to:
1. Curb the flow of migrants at the southern border.
2. Crack down on the cartels and curb the flow of drugs to the U.S.
3. Receive Mexican nationals who will be deported from the United States.
4. Crack down on Chinese investment in Mexico.
5. Stop the flow of Chinese vehicles into Mexico.
He is clearly using the threat of tariffs on Mexican exports to the United States to pressure Sheinbaum into doing what he wants in each of these areas (as we saw last week with Colombia). Trump has put so many demands on the table, and given the above-mentioned asymmetry of the negotiation, it naturally puts Sheinbaum and her team on the defensive. Mexico would like to stop the flow of U.S. guns into Mexico and obviously avoid tariffs from the U.S., but beyond that is not making any significant demands of the United States. Fortunately for Mexico, tariffs on Mexican exports to the US is likely something that would hurt the U.S. economy as well — no matter what Trump says.
Here is what I think will ultimately happen: Look for Mexico to show some significant steps and progress in each of the five key areas. In fact, in each one of them, Sheinbaum’s administration has already taken some initial steps and more tangible actions than her predecessor. This will be noticed and should be well-received by the new U.S. administration. She also has shown that she is smart, tough, charming and very likeable. From my experience, this will help her tremendously in the negotiation.
To avoid inflation risks in the United States, any tariffs that ultimately are applied against Mexico will likely be very targeted, much smaller than threatened, and short term. The threat will, however, push Mexico to take even more action in each of the key areas while at the same time not causing too much tariff-related pain on either side of the border.
Sheinbaum’s administration has been doing a good job pointing out the deep interconnectedness of both economies and its benefits, as well as the risk that tariffs could stoke inflation. The arguments have been presented in a calm, fact-based and objective manner. This has been an important strategy, but in this case pure, rational logic likely will not be enough. She needs to give “wins” to the Trump administration on each of the five areas that they can tout to the American people.
In summary, I think that Mexico will continue to take actions and make some progress in each of the five key areas. As a result of this, and due to the risks of economic damage to the U.S. that would come from tariffs on Mexican goods, I do not think that the U.S. will impose any long-term, serious or substantial tariffs on Mexico. It will not be an easy or smooth ride for Mexico over the next year, but I am convinced that what will come out of this negotiation will be an increased level of dialog, coordination and cooperation between the two countries on many issues and an unprecedented amount of new investment and growth in the years to come.
Travis Bembenek is the CEO of Mexico News Daily and has been living, working or playing in Mexico for nearly 30 years.
GREAT summary of likely outcome Travis! Both countries have much to gain by working together. And given Mexico’s dip last year in GDP, working together can spell great near-shoring opportunities for growth. I think the things you noted Trump is looking for are right on, and should truly be helpful to both countries.
I agree with you Randy.
“What I can say with confidence is that I think Trump is a very shrewd and effective negotiator.”
Are you joking? That is the facade he puts on, but he is neither of these. He is a selfish bully and an authoritarian. He and Musk are rapidly dismantling and disabling the US government right now in a coup.
It was dismantled a long time ago, all the politicians caused the problems that they are facing today.
You are in my humble opinion right on!
Here comes the TDS again, LOL.
As to the topic, Claudia could put the Mexican army on Mexico’s side of the border and lock it down tight as a drum. Put an end to all caravans and deport the foreigners who’ve been using Mexico as a route for illegal immigration into the U.S. Go after the narco criminals full bore.
Deport anyone here illegally in Mexico including, apparently, more than a few “gringos.” And if you are a foreigner living here in Mexico you’d better make sure you are legal and if not, time to go home and do it right. We can’t complain about Mexicans flouting U.S. immigration laws if we do the same.
Trump will get 1,2 and 3. Why doesn’t Mexico build their own cars effectively taking out 4 and 5?
To Daniel Houk: if Mexico enforced the exit of undocumented Gringos living here it be another large caravan going North.!
Have to agree 100% with your analysis! We shall see what happens. The show goes on. 🍿🍿🍺🍺
Well after all the talking he did what he said he would
Twenty five percent on everything from México. Same 25 percent for Canada with the exception of oil at 10 percent. Ten percent as well on China.
I predicted the anyone who would listen that despite all the negotiation Trump would impose these tariffs. He likes flexes his muscles.
This will hurt México much much more than the USA.
May you live interesting in interesting
William (Memo) Layman
Stop buying consumer products as much as possible. Consumer purchases make up 70% of the American GDP. Tariffs are a form of a national sales tax, which affects the poor far more as a percentage of their expendable income. The Felon president’s plan is to make the poor poorer and then take that revenue to give tax reductions to corporations and the richest 10%. The trump plan is a reverse Robin Hood. You heard it here first!
Again, another well thought out article Travis. I find myself agreeing with most of what you state. The only opinion I have, is that while Mexico wants to curb the flow of firearms, it is the cartels that are smuggling them into the country. My belief is that for any serious progress to be made, Mexico will need to, whether covertly or publicly, work with the US to go after the cartels. This will not be an easy or popular position, allowing the US to enter Mexico. It would also, if at all successful, upend most of the structure and foundation of how Mexico operates. However, I feel the alternative is to get involved in an ugly tit-for-tat with arguably, the world’s greatest Superpower. Currently being controlled by leadership, the style of which the world hasn’t seen in a long time. I agree that if Mr Trump implements his proposed policies, Americans will suffer from higher prices and it could carry political ramifications. Mr Trump is up against term limits (currently), the Democrats don’t have a viable plan at this time, and Republicans can denounce some of Mr Trump’s policies while maintaining the America First mantra that has resonated with voters. The citizens affected most are people Mr Trump and the Republicans don’t care about. The majority are easily manipulated and don’t have enough money to benefit these Republicans. If 2024 taught us anything, it’s just how racist, angry, and uneducated the majority of Americans are. The only thing that will reduce illegal immigration, the flow of narcotics, and lessen the number of weapons entering Mexico, allowing all parties to “win” is the elimination of the gangs that are controlling all of it. An extremely difficult, polarizing, yet important decision, but one that I believe needs to be made. Quickly.
Travis you have been in Mexico actually Mexico City 30 years and you have not learned much about the north and the actual manufacturing done in Mexico. 60 % of the manufacturing comes from US owned companies. Therefore, your assumption among others including Trump a shrewd negotiator is kind of weak and misinformed (look for how he rather Wilbur Ross, negotiated with Carl Ichan and Trump as just a foolish by standard on behalf of his debt holders when he went bankrupt in Atlantic City, shrewd negotiator, Forbes di? ) All Sheinbaum needs to do is close the border for one week and the pressure on Trump by hundreds or real CEO’s will be incredible) You should visit some real CEOs in the US maybe you will learn something. The only point you get right is that Sheinbaum is incapable of restraining the Cartels, it will need Trump. but it also needs a leader and Trump’s leadership abilities are lacking, maybe the declaration of the Cartels as Terrorist organizations places the US action on a protocol already established and that can be followed. If it, depended on the executive branch (trump) to think and take a leadership position, forget it when has your shrewd negotiator guy shown any semblance of attention to detail. planning and or executing a plan, NEVER!