Friday, February 14, 2025

What could a Sheinbaum-Trump deal look like? A perspective from our CEO

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.

Two photos, one of U.S. President-elect Trump and another of Mexican President Claudia Sheinbaum
The United States’ economic and political power puts President Sheinbaum at a disadvantage in any negotiation scenario. (Gage Skidmore via Flickr/Cuartoscuro)

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.

A stretch of the Mexico-US border wall in the desert
Many of Trump’s demands relate to the flow of migrants and drugs across the Mexico-U.S. border. (Greg Bulla/Unsplash)

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.

65 COMMENTS

  1. Two points—- the immigration and drugs are a smoke screen for the economic points. They can be papered over as far as trump is concerned

    Mexicans have one big leverage though possibly high risk— to cancel business licenses for American companies. Let the ceo of Starbucks or Macdonald or Walmart pressure trump to back down.

  2. Very interesting to read the comments in this article. I am a mexican and I have lived a very difficult economic crisis in 1995. What I can tell you from my experience is that the consumption of american goods of the mexican population is very low, I would say that more than 90 percent of the consumption is produced in Mexico. The tricky import is corn to feed animals, which not used for population. I truly believe that the hit of these tariffs would be stronger to the USA consumers. The main impact for mexicans probably would be in less jobs, because the auto american companies are probably going to reduce production since they are going to be less competitive. These tariffs will make the competitors stronger and the american industry more vulnerable. I do not understand why USA believes that the flow of drugs is only caused by drug cartels when the big pharmaceutical companies created the addiction which would be very difficult to stop. If the government of USA is nit more proactive on stopping the addictions the flow of drugs would not be reduced. Time will tell how these tariffs will impact to both countries but quite frankly I do not think will help.

  3. Travis I would appreciate my subscription to MND more if you had coverage of events on weekends, including President Sheinbaum’s response to the tariffs, which I believe she issued last night. I realize that’s probably difficult but perhaps instead of writing editorials you could write factual stories. There’s plenty of time for analysis, but this reader at least would appreciate facts first. Thanks for all you do: I know it’s tough to run a media outlet in 2024.

  4. As a Canadian, who lives half of the year in Mexico, I have been watching Trump closely over the past little while. He is not open to negotiation, he is bullying two sovereign nations without regard to current trade agreements that were negotiated in good faith during his last administration. Canada and Mexico must work together to apply countervailing pressure where ever possible.
    Just think of the effect of a coordinated effort next weekend to halt the import of avocados from Mexico and Oil, gas and electricity from Canada! Super Bowl Sunday would waken the American populace to the need for true “negotiation”.

  5. Washington is back to the 1800s myth of manifest destiny……but the world has evolved. Washington is reenacting the past, while the world is welcoming the future.
    Washington has returned to the lawless times, bullying, threatening with lack of principles, to “get what it wants” -which could be laughable but is tragically causing chaos.
    I appreciate you trying to pinpoint items, but your five points are irrelevant. It is about domination and expansion.
    1- Deportations under Bush (over 2 million), under Clinton (over 7 million) under G.W. Bush (over 4 million), under Obama (almost 3 million) under Trump 1 (less than 1 million), under Biden (less than 1 million)
    2- The drugs and cartels war ignited by US (Good chronicle on “Chasing the Scream”)
    3- You need to learn the plan already in place. Provide facts.
    4- Why? The Monroe doctrine is in the past. Mexico will do what is convenient for their small business, i.e. textile, shoes, etc.
    5- Why? It is for Mexico to decide.

    The drug addiction in the US has been fueled by their own physicians prescribing drugs indiscriminately -from teens to older adults-. Additionally post-modern struggles cannot be solved with superficial measures. Now that the US is walking away from science -and law- is going to be interesting what else will happen, as it already has a higher problem that other countries in mass shootings, suicides, incarceration, and violence in general.
    New opportunities for Mexico.
    The world is watching. It will be interesting to observe the shifts that will happen.

  6. All valid points, Travis. Still, the long term effect is that Canada, Mexico and the EU will pivot economically from a US centric world. The Dark Side of the US is showing it ugly head. Most countries were following the US-led economic order. Now they are being threatened by clueless child who does not understand the economic interdependence among countries.

    The issues (drugs, migration, et al) that Trump wants to address are serious. But lasting solutions require cooperation and coordination. The US needs to also look at itself. Blaming others is easy; threatening your friends and neighbors is folly.

  7. Over population is driving mass migration. Countries are beginning to fortify and close their gates. Fort USA is closing the gate on the south border from Latam, bringing usa businesses home and using economics to siege Canada and its resources on the north. The rest is a smoke screen. Time will tell. I do not support this approach. It’s win-lose. win-win is NAFTA.

  8. I disagree with your point about Trump’s negotiating acumen. Here is the best, most cogent and elegantly simple explanation into the inexplicably destructive negotiating processes of the president, by Prof. David Honig of Indiana University.

    Trump, as most of us know, is the credited author of “The Art of the Deal,” a book that was actually ghost written by a man named Tony Schwartz, who was given access to Trump and wrote based upon his observations. If you’ve read The Art of the Deal, or if you’ve followed Trump lately, you’ll know, even if you didn’t know the label, that he sees all dealmaking as what we call “distributive bargaining.”
    Distributive bargaining always has a winner and a loser. It happens when there is a fixed quantity of something and two sides are fighting over how it gets distributed. Think of it as a pie and you’re fighting over who gets how many pieces. In Trump’s world, the bargaining was for a building, or for construction work, or subcontractors. He perceives a successful bargain as one in which there is a winner and a loser, so if he pays less than the seller wants, he wins. The more he saves the more he wins.

    The other type of bargaining is called integrative bargaining. In integrative bargaining the two sides don’t have a complete conflict of interest, and it is possible to reach mutually beneficial agreements. Think of it, not a single pie to be divided by two hungry people, but as a baker and a caterer negotiating over how many pies will be baked at what prices, and the nature of their ongoing relationship after this one gig is over.

    The problem with Trump is that he sees only distributive bargaining in an international world that requires integrative bargaining. He can raise tariffs, but so can other countries. He can’t demand they not respond. There is no defined end to the negotiation and there is no simple winner and loser. There are always more pies to be baked. Further, negotiations aren’t binary. China’s choices aren’t (a) buy soybeans from US farmers, or (b) don’t buy soybeans. They can also (c) buy soybeans from Russia, or Argentina, or Brazil, or Canada, etc. That completely strips the distributive bargainer of his power to win or lose, to control the negotiation.

    One of the risks of distributive bargaining is bad will. In a one-time distributive bargain, e.g. negotiating with the cabinet maker in your casino about whether you’re going to pay his whole bill or demand a discount, you don’t have to worry about your ongoing credibility or the next deal. If you do that to the cabinet maker, you can bet he won’t agree to do the cabinets in your next casino, and you’re going to have to find another cabinet maker.
    There isn’t another Canada [or Mexico].
    So when you approach international negotiation, in a world as complex as ours, with integrated economies and multiple buyers and sellers, you simply must approach them through integrative bargaining. If you attempt distributive bargaining, success is impossible. And we see that already.
    Trump has raised tariffs on China. China responded, in addition to raising tariffs on US goods, by dropping all its soybean orders from the US and buying them from Russia. The effect is not only to cause tremendous harm to US farmers, but also to increase Russian revenue, making Russia less susceptible to sanctions and boycotts, increasing its economic and political power in the world, and reducing ours. Trump saw steel and aluminum and thought it would be an easy win, BECAUSE HE SAW ONLY STEEL AND ALUMINUM – HE SEES EVERY NEGOTIATION AS DISTRIBUTIVE. China saw it as integrative, and integrated Russia and its soybean purchase orders into a far more complex negotiation ecosystem.
    Trump has the same weakness politically. For every winner there must be a loser. And that’s just not how politics works, not over the long run.
    For people who study negotiations, this is incredibly basic stuff, negotiations 101, definitions you learn before you even start talking about styles and tactics. And here’s another huge problem for us.
    Trump is utterly convinced that his experience in a closely held real estate company has prepared him to run a nation, and therefore he rejects the advice of people who spent entire careers studying the nuances of international negotiations and diplomacy. But the leaders on the other side of the table have not eschewed expertise, they have embraced it. And that means they look at Trump and, given his very limited tool chest and his blindly distributive understanding of negotiation, they know exactly what he is going to do and exactly how to respond to it.
    From a professional negotiation point of view, Trump isn’t even bringing checkers to a chess match. He’s bringing a quarter that he insists of flipping for heads or tails, while everybody else is studying the chess board to decide whether its better to open with Najdorf or Grünfeld.” 
    — David Honig

  9. Scheinbaum is playing a weak hand as best she can, and she is getting recognition for this from many Mexicans. She is going after the cartels with more determination than her predecessor and is keeping her head cool, but she has a herculean task. Let’s hope she keeps at it.

  10. If Sheinbaum agrees to send more troops to police illegal immigration at Mx’s northern & southern borders- she should demand one thing in return: From Texas to Ca there are 9000 gun stores within a few miles of the border. She should ask Trump to close those stores and prohibit any gun sales (individuals limited to small numbers of non-military assault weapons excluded) within 100 miles of the border. We need to slow down military assault weapons going south and drugs headed north.

  11. Well surprise. Surprise. Nothing happened. Trump is a big bully and no one is afraid of him. The market was tumbling on the prospect of the tariffs early on Monday. The US has more to lose, Mexico can look to china to supplement its commerce. China would love it. Trump got 10k agents at the border. Meanwhile. Last year Mexico had 15k. The only people believing what trump says is good for anyone are his supporters

  12. from Todays Guardian he point is to show the world – not just Canada and Mexico – that he’s willing to mete out big punishments
    Tue 4 Feb 2025 17.30 GMT
    From Robert Reich
    Trump has struck last-minute deals with the leaders of Mexico and Canada to postpone for 30 days hefty tariffs on goods they export to the United States, temporarily averting a damaging trade war.

    Over the next month, Mexico and Canada will negotiate with Trump.

    But it would be wrong to conclude that Trump’s threat to raise tariffs 25% on the US’s two neighbors is just about gaining bargaining leverage.

    Hours before the Canadian tariffs went into effect, Trump was asked if there was anything Canada could do to stop them. “We’re not looking for a concession,” Trump said, speaking to reporters in the Oval Office on Friday afternoon. “We’ll just see what happens, we’ll see what happens.”

    The real reason for Trump’s threats is to show the world that he’s willing to harm smaller economies even at the cost of harming the US’s very large one.

    The point is the show so the world – not just Canada and Mexico – knows it’s dealing with someone who’s willing to mete out big punishments. Trump increases his power by demonstrating he has the power and is willing to use it.

    The same with deporting, say, Colombians in military planes, handcuffed and shackled. Trump says, without any basis in fact, that they’re criminals.

    If Colombia complains about their treatment, so much the better. Trump threatens tariffs. Colombia backs down, and Trump has once again demonstrated his power.

    Why did Trump stop foreign aid? Not because it’s wasteful. In fact, it helps stabilize the world and reduces the spread of communicable diseases. The real reason Trump stopped foreign aid is he wants to show he can.

    Why is he disregarding or threatening to tear up treaties and agreements (the Paris agreement, Nato, whatever)? Not because such treaties and agreements are bad for America. To the contrary, they’re in the US’s best interest.

    The reason Trump is tearing them up is they tie Trump’s hands and thereby limit his discretion to dish out punishments and rewards.

    Don’t think of these as individual “policies”. Think of them together as demonstrations of Trump’s strength.

    If he doesn’t reach a deal with Canada or Mexico over the next 30 days and one or both retaliate against US-imposed tariffs with their own tariffs on US exports, he’ll retaliate against them with even bigger tariffs.

    If some senior Republican members of Congress object that he’s stepping on congressional prerogatives, so what? It’s an opportunity to show them who’s boss.

    If a federal court temporarily stops him, so what? He’ll go right on doing it and demonstrate that the courts are powerless to stop him.

    Look behind what’s happening, and you’ll see Trump employing two techniques to gain more power than any US president has ever wielded.

    The first is to demonstrate that he can mete out huge punishments and rewards.

    It doesn’t matter if the punishment or reward is justified. A 25% tariff on Canada? Hello?

    It’s a demonstration of strength.

    If prices jump in the US for oil and lumber from Canada or for fruits and vegetables from Mexico, no problem for Trump. Most Americans don’t understand how tariffs work, anyway. Trump will blame Canada and Mexico. And then threaten them with, say, 50% tariffs. Kaboom!

    Which brings us to the second technique Trump is using to expand his power: unpredictability.

    What makes an abusive parent or spouse, or an abusive dictator, or Trump, especially terrifying? They’re unpredictable. They lash out in ways that are hard to anticipate.

    So, anyone potentially affected by their actions gives them extra-wide berth – vast amounts of obedience in advance.

    Trump keeps everyone guessing.

    He demands Denmark sell Greenland to the United States. He chews out the CEO of the Bank of America at Davos for allegedly discriminating against conservatives. He attacks birthright citizenship.

    What’s next? Who knows? That’s the whole point.

    How else to explain the bizarre deference – cowardice – we’re seeing among CEOs, the media, almost all Republican and even some Democratic lawmakers? Presumably, they’re all saying to themselves: “He could do anything, so let’s be especially careful.”

    In 1517, Niccolò Machiavelli argued that sometimes it is “a very wise thing to simulate madness”.

    The “rule of law” is all about predictability. We need predictability to be free.

    But much of what Trump is doing is probably either illegal yet would require months or years before the US supreme court decides so, or is in the gray area of “probably illegal but untested by the courts”. Which suits his strategy just fine.

    The media calls it “chaos”, which is how various people and institutions experience it.

    The practical consequence is that an increasing number of so-called “leaders” – in the private, public and non-profit sectors, and around the world – are telling their boards, overseers, trustees or legislatures: “We have to give Trump whatever he wants and even try to anticipate his wants, because who knows how he’ll react if we don’t?”

    Together, these two techniques – big demonstrations of discretionary power to reward or punish, and wild uncertainty about when or how he’ll do so – expand Trump’s power beyond the point any president has ever pushed it.

    Which brings us to the obvious question: why is Trump so obsessed with enlarging his power?

    Hint: it’s not about improving the wellbeing of average Americans and certainly not about making America great again (whatever that means).

    True, he’s a malignant narcissist and sadist with an insatiable lust for power who gets pleasure out of making others squirm.

    But there’s something else.

    The bigger his demonstrable power and the more unpredictably he wields it, the greater his ability to trade some of that power with people with huge amounts of wealth, both in the United States and elsewhere.

    I’m referring to America’s billionaires, such as Elon Musk and the 13 other billionaires Trump has installed in his regime, as well as the 744 other billionaires in the US, and the 9,850 Americans with at least $100m in net worth.

    Together, these individuals have a huge storehouse of wealth. Many are willing to trade some of it to gain even more, and to tie down what they have more securely.

    They give Trump (and his family) business deals, information, campaign money and positive PR (propaganda). In return, he gives them tax cuts, regulatory rollbacks and suspensions of antitrust.

    I’m also referring to oligarchs in Russia, China and Saudi Arabia. He gives them special trade deals, energy deals, intelligence deals, access to global deposits of riches; or he threatens to hold them back. In return, they give him (and his family) business deals, information, support in political campaignsand more covert propaganda.

    This is Trump’s game: huge demonstrations of power, wielded unpredictably. They’re eliciting extraordinary deals for Trump and his family, domestically and worldwide.

    Trump says he’s doing this for American workers. Nothing could be farther from the truth. He’s doing this for himself and for the world’s oligarchy, which, in turn, is busily siphoning off the wealth of the world.

    How to stop this? The first step is to understand it.

    Robert Reich, a former US secretary of labor, is a professor of public policy at the University of California, Berkeley, and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His newest book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.com

  13. Well said. As retired professor of international relations we was involved in the 7 nation talks to limit nukes in North Asia, i watched lesser powers (Korea, PakistNstan)use their limted leverage by knowing the details of the issues. Sheinbaum does, Trump doesnt. Its obviously working. Establishing 3 staff level negotiating teams moves it to her advantage. I think there will be no tarrifs and Mexico will come out ahead…quietly. The only wild card is trump lies and breaks deals.

    • Exactly ! Trump is a Dunning-Kruger phenomenon. While this I see as a necessity to perform US turnaround (MAGA) it still has the trade-off of certain unpredictability. And the only way MEXICO can be kind of immune to that pathology is to have a PLAN B and PLAN C. Stop being fully dependent (80% of exports to the US only is crazy !!) on the U.S.. Because then things will never change. Stop being a “prostitute” – sorry to be that clear and precise. While TRUMP is correct in his demands – because a good neighbor must make sure that no drugs and immigrants reach in horrendous amounts across the border (one can say that Mexico supports weakening the US in sending drugs and millions across the border). Here Trump is absolutely right and it can be only beneficial to the entire world if MAGA succeeds because the U.S. is in a desolate state. And because it is, we had an OBAMA & BIDEN administration which did ugly things to many states in the world simply because if US decays internally (=losing absolute strength) they must make sure that they keep the “relative strength” and that is being done to create turmoil and wars in the countries which threaten the U.S.´ relative strength. (Russia e.g.,). MAGA will create also peace in the world and that is why MEXICO, CANADA and even RUSSIA & CHINA must support Trump. But since the OBAMA & BIDEN administrations have created large negative trade balances this must be corrected – and that of course is painful to CHINA, EU and MEXICO. This re-balancing demands sacrifices and it should not be called a “trade war”. But back to the point: For this very reason of MAGA each country should not lose its standing and strenght. And MEXICO is worst in that. MEXICO is weak. MEXICO has to emancipate itself and find the narrow and also risky path to STRENGHT and that is to keep its negotiations open to CHINA, RUSSIA and the EU. It is logic because only a balanced export ratio e.g. only 50 % to the US, 10 – 20% to CHN, 10 % to RUSSIA and 10 – 20 % to the EU is something which creates export market balance. The U.S. in the end would appreciate a stronger MEXICO. Because ONLY A STRONGER MEXICO is able to curb all that what TRUMP actually demands – it it remains weak and a “prostitute” things will never change. If you do not believe – study Mexico´s history (and not only that with the U.S. when it was conquered by them). History always is a good hint for the future – but yes all can be changed. Everything is possible and I wish President Sheinbaum to change MEXICO´s faith. (P.S.: The Gulf of Mexico shall keep its name – this is stupid of Trump even though I like him a lot :-))

  14. I agree with CEO Bembenek on fulfilling Trumps demands as this is the responsibility of a good and fair neighbor. However – Trump only understands STRENGTH. He is a tough negotiator and he will always try to win which means the other side loses or has less than he. Now If you are satisfied with this “outcome” you can do your job, lean back and wait until he wants more the next time. Alphas and business men have the tendency to always want more besides the fact that NOTHING STAYS THE SAME and CHANGES will happen. This will result in situations where TRUMP will always push MEXICO and he will be the ACTOR and Mexico will be the REACTOR. For this very reason I strongly suggest that MEXICO finally emancipates themselves from the U.S.. How can they do it ? Mexico must keep negotiations open to all sides: To CHINA, to RUSSIA, to the EU ! The must have a PLAN B and a PLAN C. That is what TRUMP will respect – not the weak MEXICO and not the STOCK & CRYPTOMARKET reactions. While TRUMP has the right to demand all 5 things mentioned by Bembenek Mexico still has to do more: BUILD THEIR OWN STANDING in a world-economy simply with a PLAN B and PLAN C. That means they have to become as tough as TRUMP ! It is as simple as that.

LEAVE A REPLY

Please enter your comment!
Please enter your name here


Over the past two weeks, there has been an increasing number of Facebook posts from people in expat groups across the country asking if U.S. residents living in Mexico could be at risk of being deported.

Misinformation about Americans at risk of being deported from Mexico: A perspective from our CEO

38
Mexico News Daily's CEO Travis Bembenek has a few words of caution for expats living in Mexico during Trump 2.0.

Are foreigners still moving to Mexico? Our CEO interviews immigration expert Sonia Diaz

40
Mexico News Daily CEO Travis Bembenek sits down with immigration consultant Sonia Diaz to get her insight into current immigration trends.
President Sheinbaum stands in front of a banner reading "2025"

100 days in, President Sheinbaum needs to get serious about the economy, and fast: A perspective from our CEO

38
Sheinbaum's honeymoon is over as economic problems loom in Mexico, Travis Bembenek writes.