In a fierce response on Saturday, Mexican President Claudia Sheinbaum strongly rejected accusations from the United States that her government has an alliance with drug cartels. Sheinbaum’s rebuttal came after the White House made a statement that President Donald Trump would impose a hefty 25% tariff on goods from both Mexico and Canada, citing issues like illegal immigration and drug smuggling as key reasons behind the decision. The spat has pushed tensions between these closely tied neighboring countries to new heights, with both sides trading harsh words.
Mexico’s President didn’t hold back in her criticism. Sheinbaum made it clear that she had instructed her economy minister, Marcelo Ebrard, to activate “Plan B,” a strategy Mexico had prepared for such a scenario. This plan includes a mix of both tariff and non-tariff measures designed to defend the country's interests. It’s clear that the Mexican government is preparing for an intense response if the tariffs go into effect.
But the economic consequences of such tariffs are far-reaching. With the U.S. being Mexico’s largest trade partner, buying over 80% of the country's exports, the repercussions of a 25% tariff would be devastating for Mexico. The tariffs are not only about trade; they could lead to a massive hit to the Mexican economy, pushing it closer to the brink of a full-blown recession.
In response to the accusation of an “intolerable alliance” between the Mexican government and drug trafficking groups, Sheinbaum didn’t mince words. She fired back on social media, calling the claims a “slander” and categorically denying the allegations. She argued that if such an alliance exists, it’s not with the Mexican government but rather in the U.S. gun shops, which she claimed are responsible for supplying the criminal groups with high-powered weapons.
Sheinbaum also pointed a finger at the U.S. for its lack of action on domestic drug issues. “If the United States government and its agencies really wanted to combat the growing fentanyl problem in their country, they should focus on addressing the illegal drug sales that flood their major cities," Sheinbaum argued. "But they’re not doing that. And they also fail to tackle the money laundering associated with this illegal trade, which has done significant harm to their population.”
This wasn’t the first time that U.S. politicians and analysts had alleged a connection between the Mexican government and cartels, but it was the first time that a formal accusation had been made. Agustin Gutierrez Canet, a retired Mexican diplomat, weighed in on the unprecedented nature of the accusation. He described it as a major turning point, noting that the formal linkage of the Mexican government to drug trafficking in an official U.S. document was something new. “Trump uses this rhetoric to pressure, but it should never be taken lightly,” Gutierrez Canet said.
As the tariffs loom, analysts are warning of severe economic repercussions for Mexico. The U.S. is by far the largest destination for Mexican exports, so a tariff of this magnitude would cripple Mexico’s economy. In fact, experts are predicting that the 25% tariff could lead to a significant drop in Mexican exports, with some estimates suggesting it could reduce exports by around 12%. It’s also expected that Mexico’s gross domestic product (GDP) could see a sharp decline. According to Gabriela Siller, head of economic analysis at Banco BASE, Mexico's economy could shrink by as much as 4% in 2025 if the tariff remains in place for the entire year.
The economic effects wouldn’t just be felt in Mexico but could also lead to higher prices for U.S. consumers, especially when it comes to items imported from Mexico. Fruits, vegetables, and nuts, including beloved avocados, are likely to see prices surge as a result of the tariffs. The U.S. imports over $45 billion in agricultural products from Mexico each year. This includes everything from fresh strawberries, raspberries, and tomatoes to beef, as well as popular beverages like Mexican beer and tequila.
A 25% tariff on these goods would undoubtedly raise prices, and U.S. consumers would feel the effects in their everyday shopping. Analysts are also predicting that the tariffs could send both Mexico and Canada into economic recessions, especially if the situation drags on throughout 2024 and into 2025. As Siller pointed out, Mexico was already teetering on the edge of a recession by the end of 2024. If the tariff persists for several months, it could push the country into an even deeper economic crisis.
The stakes are high for both Mexico and the U.S. Tensions between the two nations, which have long shared a deep economic and political relationship, have escalated to dangerous new heights. The outcome of this dispute will not only have serious implications for trade and economics but could also influence the broader relationship between the two countries for years to come. As the tariff threat looms, both nations are bracing for the ripple effects that will likely stretch far beyond just trade and tariffs.
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